(For Bloomberg fair value curves, see CFVL <GO>)
June 13 (Bloomberg) -- West Texas Intermediate and Brent crudes charted the biggest weekly gains this year as Islamist fighters extended their advance in Iraq, triggering concern of a return to civil war.
Futures in New York climbed 4.1 percent this week while they added 4.4 percent in London. Government forces in Iraq, OPEC’s second-biggest oil producer, are seeking to dislodge Islamist militants from cities north of Baghdad after they overran army positions in Mosul this week. U.S. President Barack Obama said yesterday he won’t rule out using airstrikes to help the government.
“Prices have jumped to nine-month highs as the upsurge of violence in Iraq has raised additional risk of supply disruption,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The situation in Iraq is going to continue to guide the market for a while.”
WTI for July delivery rose 38 cents today, or 0.4 percent, to settle at $106.91 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 42 percent higher than the 100-day average.
Brent for July settlement, which expires today, increased 39 cents to $113.41 a barrel on the London-based ICE Futures Europe exchange. The August contract climbed 4 cents to $112.46. Volumes were 48 percent above the 100-day average.
The European benchmark oil traded at a $6.50 premium to WTI, compared with $6.49 at yesterday’s close.
“The situation in Iraq changed so rapidly this week,” said Sarah Emerson, managing principal of ESAI Energy Inc. in Wakefield, Massachusetts. “Mosul fell one day and the next day the militants were marching on Baghdad.”
The Islamic State in Iraq and the Levant, known as ISIL, forced a halt to repairs at the main pipeline from the Kirkuk oil field to the Mediterranean port of Ceyhan in Turkey when it overran Mosul. There were conflicting reports that Baiji, the site of Iraq’s biggest refinery, had been captured.
Prime Minister Nouri al-Maliki’s Shiite-led government is struggling to retain control of Sunni-majority regions after his army units in northern Iraq collapsed amid the extremist advance. The Interior Ministry started to prepare a new plan to defend Baghdad against an attack by members of ISIL, Al Arabiya reported, citing a ministry spokesman.
Iraq produced 3.3 million barrels a day of crude last month, data compiled by Bloomberg show. The country’s crude output capacity will increase by more than 1.2 million barrels a day in the six years through 2019, the International Energy Administration projected in its monthly oil market report today.
The fighting hasn’t spread to the south, which the U.S. Energy Information Administration says is home to three-quarters of Iraq’s crude output.
“If the Sunni rebels don’t make it to the south, oil production will continue,” said Kyle Cooper, director of research with IAF Advisors in Houston. “I bet we’ll either rise or fall by $1.50 on Monday, depending on developments over the weekend. If it looks like the south is under threat there will be a rise, and if the situation stabilizes there will be a drop.”
WTI may gain next week on concern the conflict will disrupt shipments, according to a Bloomberg News survey. Seventeen of 26 analysts and traders, or 65 percent, forecast crude will increase. Three said prices will decline.
July-delivery gasoline fell 0.8 percent after PBF Energy Inc. completed maintenance work at its Delaware City refinery in Delaware. The 182,200-barrel-a-day plant is the third-largest on the U.S. East Coast, home to New York Harbor, the delivery point for gasoline futures.
“The refinery finishing maintenance is affecting East Coast supplies,” said Carl Larry, president of Oil Outlooks & Opinions LLC.
Gasoline fell 2.6 cents to settle at $3.0577 a gallon on the Nymex. Front-month futures rose 4 percent on the week, the biggest weekly increase since March 7. Volume was 19 percent above the 100-day average.
Ultra-low-sulfur diesel fell 0.17 cent to $2.9876. Front- month futures increased 4.1 percent this week. Volume was 17 percent above the 100-day average.
Gasoline at the pump, averaged nationwide, rose 0.2 cent a gallon to $3.649 yesterday, according to AAA.com.
--With assistance from Dan Murtaugh in Houston.