West Texas Intermediate oil dropped to a two-week low and Brent fell on signs that the insurgency in Iraq won’t curb output and as U.S. stockpiles climbed.
Iraq’s crude exports will increase next month, Oil Minister Abdul Kareem al-Luaibi said Wednesday. Government forces repelled an attack by the Sunni Islamic State in Iraq and the Levant on the Baiji refinery north of Baghdad.
U.S. crude stockpiles rose by 1.74 million barrels to 388.1 million last week, the Energy Information Administration said Wednesday.
“Prices are retreating because the insurgency hasn’t had a material impact on the Iraqi production and we might be looking at a gain in exports,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Conn. “Prices are consolidating here just below the nine-month highs.”
WTI for August delivery slipped $1.19, or 1.1 percent, to $105.31 a barrel at 11:21 a.m. on the New York Mercantile Exchange. Prices reached $105.15, the lowest intraday level since June 12. Futures are up 7 percent this year.
Brent for August settlement fell 77 cents, or 0.7 percent, to $113.23 a barrel on the London-based ICE Futures Europe exchange. Futures slipped to $113.11, the lowest level since June 18. Prices have increased 2.2 percent this year.
The European benchmark crude’s premium to WTI widened to $7.92 from $7.50 Wednesday.
Iraq’s Prime Minister Nouri al-Maliki on Wednesday rejected calls to relinquish power and allow the formation of a “national salvation” government to counter the militants.
The country is the biggest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia.
Violence in Iraq spread Wednesday to Kirkuk, the northern region’s oil hub, where a car bomb killed at least seven people and wounded 20, according to a police statement.
It was the first attack there since Kurdish forces took control of the area two weeks ago after Iraq’s army fled the advance of the ISIL.
“Any potential disruption has already been priced in,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pa. “There’s already been a massive spike in prices, which is already causing economic pain for the consumer. People will have a hard time dealing with $4 gasoline or heating oil.”
U.S. gasoline inventories rose 710,000 barrels to 215 million last week, the fourth straight gain, EIA data showed Wednesday. Supplies of distillate fuel climbed 1.18 million barrels to 120.6 million, the highest level since January.
Gasoline futures for July delivery fell 1.05 cents, or 0.3 percent, to $3.0822 a gallon on the Nymex. Ultra low sulfur diesel for July delivery slipped 1.39 cents, or 0.5 percent, to $3.0159.
The most Americans in seven years will travel by car over the July 4 Independence Day holiday and they’ll be paying the highest fuel prices since 2008, according to a forecast by AAA.
Regular gasoline at the pump rose 0.3 cent to an average of $3.684 a gallon Wednesday, the highest price since April 30, according to Heathrow, Fla.-based AAA, the largest U.S. motoring group.
Refineries operated at 88.5 percent of capacity in the seven days ended June 20, up 1.4 percentage points from the prior week. Operating rates usually increase in late spring and have peaked in July during the past five years.
“One reason prices are down is that we’re very close to the peak of the refinery demand season, if we haven’t already reached it,” Schork said. “Demand will slip from this point and there’s plenty of crude here in the U.S.”
Crude stockpiles at Cushing, Okla., the delivery point for WTI traded on Nymex, increased 416,000 barrels to 21.8 million in the week ended June 20, according to the EIA.
WTI rose 0.4 percent Wednesday after the federal government opened the door to more U.S. oil exports.
The Commerce Department granted Pioneer Natural Resources Co. and Enterprise Products Partners LP requests to classify processed condensates as petroleum products eligible for shipment to other countries.
“This is a very small step in opening up to crude exports,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Mass. “This move alone isn’t enough to make a measurable difference.”