• News
  • SAN DIEGO
  • Finance

Brent Oil Rises on Iraq Unrest; WTI Slips on Cushing Supply Gain

June 18 (Bloomberg) -- Brent oil rose above $114 a barrel as Iraqi forces battled extremists north of Baghdad. West Texas Intermediate erased gains after crude supplies rose at Cushing, Oklahoma, delivery point for the contract.

Islamist insurgents battled the military for control of the Baiji refinery in northern Iraq, the country’s largest. Local police said militants are inside the plant, while the central government said its elite troops are in control. WTI slipped after the U.S. Energy Information Administration said supplies rose 247,000 barrels to 21.4 million in the seven days ended June 13, the first gain in 10 weeks.

“The global political situation continues to be the main driver of oil,” said Adam Wise, who helps run a $6 billion oil and gas bond portfolio as a managing director at John Hancock in Boston. “Until there’s some stability in Iraq the oil market will remain extremely volatile.”

Brent for August settlement rose 63 cents, or 0.6 percent, to $114.08 a barrel on the London-based ICE Futures Europe exchange at 1 p.m. in New York. The volume of all futures traded was 18 percent above the 100-day average.

WTI for July delivery declined 18 cents to $106.18 a barrel on the New York Mercantile Exchange. Futures traded at $106.63 before the release of the report at 10:30 a.m. in Washington. The contract touched $107.68 on June 13, the highest level since Sept. 19. Volumes were 44 percent higher than the 100-day average.

Premium Widens

The European benchmark traded at an $8.39 premium to the August WTI contract versus $7.58 at yesterday’s close. Brent, which is used to price more than half of the world’s oil, is typically more sensitive to changes to the global supply-and- demand balance.

“As the situation in Iraq deteriorates, you are going to see the differentials between WTI and global oils increase,” Wise said.

A fuel tank at Baiji refinery caught fire after shelling by militants, according to the Salahuddin provincial police command. The refinery halted operations yesterday because its storage tanks were full, according to Iraq’s Oil Ministry.

BP Plc has evacuated non-essential production staff from Iraq, a company spokesman said today. BP is still operating in southern Iraq, the spokesman said, confirming remarks made by CEO Bob Dudley yesterday in Moscow. Exxon Mobil Corp. carried out an evacuation of personnel at its facilities in Iraq, Reuters reported, quoting a government official.

Drone Operations

The U.S. is conducting aerial drone operations over northern Iraq at the government’s request, Treasury Secretary Jacob J. Lew said in Jerusalem today. President Barack Obama is still deciding on whether to use military options, National Security Council spokeswoman Bernadette Meehan said yesterday.

Iraqi Prime Minister Nouri al-Maliki said the extremist threat his forces are battling will spread to neighboring countries. Clashes between Islamic State in Iraq and the Levant fighters and the government forces have broken out across northern and central Iraq since the fall of Mosul last week.

Kurdish troops have taken control of the Kirkuk oil field, Iraq’s fourth-largest, after the military abandoned the area last week. The fighting hasn’t spread to the south, which the EIA estimates is home to three-quarters of Iraqi output.

Cushing stockpiles slipped to 21.7 million barrels in the week ended June 6, the lowest level since November 2008, according to the EIA, the Energy Department’s statistical arm.

Refinery Rates

U.S. refineries operated at 87.1 percent of capacity in the seven days ended June 13, the lowest rate since March, EIA data showed. The Baiji refinery in northern Iraq, the country’s largest, was damaged as a battle raged over control of the plant.

“WTI has come off a bit because of the gain at Cushing and the fall in refinery activity,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “The oil companies are getting better at moving barrels from one part of the country to another.”

Nationwide crude stockpiles fell 579,000 barrels to 386.3 million last week, the report showed. A 750,000-barrel inventory drop was projected, according to the median of eight analyst estimates in a Bloomberg survey. Supplies rose to 399.4 million barrels in the week ended April 25, the most since the EIA began publishing weekly data in 1982.

U.S. crude production increased 17,000 barrels a day to 8.477 million, the highest since October 1986. Output has surged this year as a combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations, including the Bakken in North Dakota and the Eagle Ford in Texas.

Gasoline stockpiles increased 785,000 barrels to 214.3 million. Supplies of distillate fuel, a category that includes heating oil and diesel, rose 436,000 barrels to 119.4 million.

Gasoline for July delivery rose 0.99 cent, or 0.3 percent, to $3.101 a gallon on the Nymex. Ultra low sulfur diesel gained 2.29 cents, or 0.8 percent, to $3.0409. Diesel futures reached $3.0458, the highest level since March 4.

User Response
0 UserComments