Crude oil (NYMEX:CLU14) rose as U.S. President Barack Obama authorized airstrikes in parts of Iraq, OPEC’s second-largest producer, while Chevron Corp. said it was withdrawing some workers.
Brent futures advanced as much as 1.3 percent in London and West Texas Intermediate by 1.1 percent in New York. Obama said yesterday that the strikes, if needed, would be used to protect U.S. personnel and Yezidis, a minority sect concentrated in northern Iraq, who have been targeted by militants and are stranded on a mountain. Conflict in the OPEC producer has so far spared production in Iraq’s south, home to about three-quarters of its crude output.
“U.S. approval of airstrikes moved the conflict to a new level, and made its extreme potential for danger in the region visible,” Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, said by e-mail.
Brent (NYMEX:SCU14) for September settlement gained as much as $1.41 to $106.85 a barrel on the London-based ICE Futures Europe exchange and was at $105.81 at 1:31 p.m. London time. Prices are up 0.9 percent this week.
WTI for September delivery climbed as much as $1.11 to $98.45 a barrel in electronic trading on the New York Mercantile Exchange. The grade is down 0.3 percent this week. The volume of all futures traded was 18 percent above the 100-day average for the time of day. The U.S. benchmark crude was at a discount of $8.26 to Brent.
Brent increased 2.7 percent in June, the most in 10 months, as fighters from a breakaway al-Qaeda group known as the Islamic State captured the northern city of Mosul and advanced toward Baghdad. Iraq pumped 3 million barrels a day in July, compared with 9.82 million from Saudi Arabia, the biggest OPEC producer, according to data compiled by Bloomberg.
Obama said the U.S. will strike militants if they move toward the Kurdish city of Erbil, where it has diplomatic personnel. The U.S., which also dispatched planes to drop food and water for trapped civilians in Iraq, has “unique capabilities to help avert a massacre” and “cannot turn a blind eye,” Obama said in remarks at the White House.
The militants, previously known as Islamic State in Iraq and the Levant, attacked villages in the north of the country, driving as many as 50,000 people into hiding in the mountains without water or food. The group also seized the nation’s largest dam, destruction of which could flood the city of Mosul, according to an employee on site and local officials.
“A prolonged increase in prices would only be justified if the oilfields were captured by ISIS and ISIS declared them to be shut indefinitely, or worse, set them on fire,” Christopher Bellew, senior broker at Jefferies International Ltd., said by e-mail.
Kurdish forces known as the Peshmerga need military support to fight the militants, Falah Mustafa Bakir, the regional government’s foreign minister, said yesterday in an interview. Security personnel have been fighting Islamic State for several weeks, battling for control of territory and oil fields close to the semi-autonomous region’s borders.
Chevron said yesterday it had “reviewed the business- critical expatriate positions and as a consequence made a reduction in the total numbers of expatriates in the region.”
Genel Energy Plc, the largest producer in Iraqi Kurdistan, said the region’s independent pipeline exports won’t be impeded by the violence and political turmoil engulfing the country. The regional government has loaded five cargoes in Ceyhan, Turkey, and two have been bought and paid for, Chief Financial Officer Julian Metherell said Aug. 5.
The Organization of Petroleum Exporting Countries trimmed its estimate for the amount of crude it will need to provide this year by 100,000 barrels a day to an average 29.6 million. Daily production from the group’s 12 members increased by 167,000 barrels to 29.91 million in July, OPEC said in its monthly report today.