Brent Crude Halts Longest Decline Since August Amid Iraq Clashes

Jan 07, 2014 8:36 am ET

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Jan. 7 (Bloomberg) -- Brent halted its longest run of losses since August on concern that clashes between Iraq’s government and militants linked to Al-Qaeda may lead to a disruption in oil output.

Futures climbed as much as 0.7 percent in London, snapping a five-day losing streak, amid fighting in the city of Fallujah and surrounding Anbar province in Iraq, the largest OPEC member after Saudi Arabia. West Texas Intermediate broke its longest run of losses since September amid the coldest U.S. weather in almost 20 years and forecasts that the nation’s crude inventories declined for a sixth week.

“A lot depends on geopolitics,” said Hannes Loacker, an analyst at Raiffeisen Bank International AG in Vienna. “People shouldn’t ignore the tensions in Iraq. This may become much more serious than it already is.”

Brent for February settlement rose as much as 79 cents to $107.52 a barrel on the ICE Futures Europe exchange and was at $107.23 as of 1:25 p.m. London time. The European benchmark crude was at a premium of $13.29 to WTI. The spread widened for a fifth day yesterday to close at $13.48.

WTI for February delivery rose as much as 72 cents to $94.15 a barrel in electronic trading on the New York Mercantile Exchange. The volume of all futures traded was about 22 percent below the 100-day average.

Anbar Clashes

Sunni Muslim fighters in Iraq’s Anbar province vowed to fight off an effort by government forces to regain control of towns in the region that Prime Minister Nouri al-Maliki says are under the sway of al-Qaeda. Iraq pumped 3.2 million barrels of crude a day in December, making it the second-largest producer in the Organization of Petroleum Exporting Countries, according to a Bloomberg survey.

“Iraq’s ongoing security and political challenges are putting at risk the essential oil export capacity build-out slated for 2014,” Barclays Plc said in a note yesterday.

Brent also advanced after shipping programs showed exports of the North Sea grade will drop by one cargo in February to five shipments of 600,000 barrels each and that 10 lots of Ekofisk crude were deferred to February from this month. Exports of Forties, another of the four grades that make up Dated Brent, will decline next month by three lots to 19, schedules showed. The full Ekofisk program is due later today.

Libya Recovery

Libya expects to restore output to as much as 650,000 barrels a day within the next three days, from its current 300,000 to 350,000 barrels, following a restart of the Sharara field, Ibrahim Al Awami, the oil ministry’s head of measurement and inspection, said by phone today from Tripoli. Protests and the seizure of ports by rebels has reduced the OPEC member’s output to about a fifth of its capacity.

Libya’s navy foiled an attempt to export oil from the rebel-held Es Sider port. Naval forces stopped a Malta-flagged vessel from entering the nation’s territorial waters and warned it against loading crude from facilities not under the control of National Oil Corp., said Mohamed El-Harari, a spokesman at the state-owned company.

Freezing weather that set records across the U.S. Midwest, stopping trains and planes and driving up energy use, may deliver the coldest day across the country in almost 20 years by a measure of heating demand.

Yesterday’s temperature low in Chicago reached a record for the date at minus 16 degrees Fahrenheit (minus 27 Celsius), beating the mark of minus 14 set in 1884 and 1988, the National Weather Service said. Today, New York’s high will struggle to reach 10 degrees Fahrenheit.

Midwest Refiners

“Some refiners in the Midwest are starting to suffer from operating issues, and if that continues today then it can translate into the cold having a longer lasting impact than the weather forecast,” Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, said by e-mail.

U.S. crude stockpiles fell by 3.4 million barrels in the week ended Jan. 3, according to the median estimate of six analysts surveyed by Bloomberg before tomorrow’s report from the Energy Information Administration, the Energy Department’s statistical arm. Supplies slid the prior five weeks to 360.6 million, the lowest level since September.

Gasoline stockpiles are projected to have expanded by 2.5 million barrels while distillates, including heating oil and diesel, probably increased by 2 million, the survey showed.

--With assistance from Ben Sharples in Melbourne and Ann Koh in Singapore. Editors: Raj Rajendran, John Deane