Brent Trades Near 9-Month Low After U.S. Iraq Strike; WTI Steady

Aug 11, 2014 8:50 am ET

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Aug. 11 (Bloomberg) -- Brent crude traded near its lowest level in nine months amid speculation that U.S. air strikes in Iraq diminished the threat to oil supplies posed by insurgents. West Texas Intermediate was little changed.

Futures fell 0.2 percent in London. U.S. jets and drone aircraft hit Islamic State fighters in multiple attacks intended to protect American personnel and prevent a massacre of ethnic and religious minorities in northern Iraq. Iraqi Prime Minister Nouri al-Maliki deployed troops and tanks on the streets of Baghdad as he resists U.S. President Barack Obama’s push for a more inclusive government.

“There is probably no doubt on the ground that the strikes have helped improved confidence on the Kurdish side,” Ole Sloth Hansen, an analyst at Saxo Bank A/S in Copenhagen, said by e- mail. “Given the U.S. commitment to bomb, if the Islamic State stick their neck out too far I would say the situation there is contained.”

Brent for September settlement fell 18 cents to $104.84 a barrel on the ICE Futures Europe exchange at 1:48 p.m. London time. The contract closed at $104.59 on Aug. 6, the lowest level since November 2013. The volume of all futures traded was 39 percent below the 100-day average for the time of day. WTI, the U.S. benchmark crude, traded at a discount of $7.12 to Brent on ICE, compared with $7.37 on Aug. 8.

WTI for September was little changed at $97.75 a barrel in electronic trading on the New York Mercantile Exchange. Prices, which closed at a six-month low of $96.92 on Aug. 6, are down 0.7 percent this year.

Air Strikes

U.S. Secretary of State John Kerry pulled support from Iraq’s Prime Minister Nouri al-Maliki today, as several countries prepared to deliver arms to Kurdish fighters amid reports that Islamic State militants had seized a town northeast of Baghdad.

Air strikes targeting militants in northern Iraq destroyed several armed trucks and a mortar position held by militants yesterday, the U.S. Central Command in Tampa, Florida, said in a statement.

Iraq’s oil exports will exceed 2.5 million barrels a day this month as it taps oilfields in the south, Oil Minister Abdul Kareem al-Luaibi told reporters in Baghdad today.

Geopolitical Conflicts

“Despite the fact that there are several ongoing geopolitical conflicts, oil prices have remained significantly lower than they should be,” Hong Sung Ki, an analyst at Samsung Futures Inc. in Seoul, said by phone. “WTI prices will show a continuous rise up to $100.”

In Ukraine, the military demanded that pro-Russian rebels surrender and dismissed offers of a cease-fire. Ukraine is trying to dislodge separatists from strongholds in Donetsk and Luhansk as Russia raises the pressure on its western neighbor to halt the campaign and allow immediate assistance.

President Vladimir Putin, who is blamed by Ukraine and its U.S. and European allies for stoking the conflict, said the fighting is creating a humanitarian disaster and offered to provide aid.

Hedge funds and other money managers decreased their net- long position in WTI futures by 15 percent to 236,381 futures and options combined in the week ended Aug. 5, U.S. Commodity Futures Trading Commission data show.

In London, speculators cut bullish bets on Brent to the lowest in six months in the week ended Aug. 5, ICE data showed today. Speculative bets that prices will rise, in futures and options combined, outnumbered wagers that prices will fall by 97,351 contracts, ICE’s Commitments of Traders report showed.

--With assistance from Heesu Lee in Seoul and Kadhim Ajrash in Baghdad.