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

Aug 11, 2014 5:09 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 lost as much as 0.3 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.

The U.S. action “eased fears of oil supply disruptions as hopes increased that this would prevent the Islamic State militants from gaining more land,” Michael Poulsen, an analyst at Global Risk Management Ltd. in Middelfart, Denmark, said in a report.

Brent for September settlement slipped 21 cents, or 0.2 percent, to $104.81 a barrel on the ICE Futures Europe exchange at 9:39 a.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 36 percent below the 100-day average for the time of day. WTI, the U.S. benchmark crude, traded at a discount of $7.04 to Brent, compared with $7.37 on Aug. 8.

WTI for September delivery rose as much as 42 cents to $98.07 a barrel in electronic trading on the New York Mercantile Exchange and was at $97.77 as of 9:39 a.m. in London. Prices, which closed at a six-month low of $96.92 on Aug. 6, are down 0.7 percent this year.

Air Strikes

The U.S. urged Iraqi leaders to form an inclusive new government. Prime Minister Nouri al-Maliki, a Shiite Muslim, has been accused of being a divisive figure whose actions have pushed minority Sunni Muslims into an alliance with the radical Islamic State.

The U.S. conducted new air strikes against Islamic State militants in Iraq yesterday, destroying several armed trucks and a mortar position held by militants, the U.S. Central Command in Tampa, Florida, said in a statement.

“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.

--With assistance from Heesu Lee in Seoul.