NEW YORK (MarketWatch) — Brent crude, the global oil benchmark, on Thursday pushed above $115 a barrel for the first time since September, boosted by continued worries over Iraq, while the U.S. benchmark lagged behind on supply concerns.
ICE August Brent futures (UK:LCOQ4) were up 93 cents, or 0.8%, at $115.19 a barrel. On Nymex, WTI crude futures initially traded lower but were then pulled higher as Brent rallied. The Nymex August contract (CLQ4) rose 34 cents, or 0.3% to $105.93 a barrel. Nymex crude had topped $107 last week as Iraqi turmoil grew.
The risk premium built into Brent prices "is here to stay in the near future as long as the situation remains tense," said Andrey Kryuchenkov, strategist at VTB Capital. "There is no direct threat to the production facilities south of the capital just yet, but the market is not complacent about accounting for some degree of uncertainty here."
President Barack Obama on Thursday said the U.S. is prepared to take targeted military action in Iraq if warranted and that the U.S. would send up to 300 military advisers to the country. He insisted, however, that U.S. troops won't be returning to combat in the country.
Reuters A general view of Iraq's Baiji oil refinery in January 2009. News reports said Iraqi government forces continued to battle Sunni militants for control of the country's biggest oil refinery in the northern town of Baiji. The refinery produces oil for domestic consumption and the fight isn't seen directly impacting exports from Iraq's crucial southern oilfields and facilities.
However, reports Wednesday that oil majors have begun to move nonessential personnel out of the south have highlighted concerns that exports could be curtailed. Iraq exports around 2.5 million barrels a day. Strategists have warned that significant disruptions could send oil toward $125 a barrel or higher. Meanwhile, the conflict has undercut expectations for Iraq to boost future oil production, which could provide a long-term floor for prices. See: Why Iraq means you can kiss idea of sub-$100 oil goodbye.
"Specifically, key infrastructure developments might be delayed, hampering export growth in spite of rising export handling capacity at Basra," in the south, wrote strategists at JBC Energy. However, in the north of Iraq, "the apparent consolidation of Kurdish power may in fact even herald higher exports," they said in a note.
Nymex futures were undercut Wednesday by a smaller-than-expected drop in U.S. crude inventories reported by the Energy Information Administration.
In other product markets, July natural-gas futures (NGN14) fellnearly 4 cents, or 0.8%, to $4.62 per million British thermal units. July gasoline (RBN4) rose nearly 3 cents to $3.13 a gallon, while July heating oil (HON4) was up around 1.5 cents to $3.06 a gallon.
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