Brent hits 9-month top at $114 on Iraq crisis
Singapore, June 13, 2014
Brent crude climbed to a nine-month high near $114 a barrel on Friday, as supply disruption fears took centre stage after the United States threatened military action in Iraq against Sunni Islamist militants who are pushing on towards Baghdad.
The jihadists extended their lightning advance to towns only about an hour's drive from Baghdad while trucks carrying Shi'ite volunteers in uniform rumbled towards the front lines to defend the city, stoking concerns of prolonged unrest and bloodbath.
Brent rose 26 cents to $113.28 a barrel by 0510 GMT, after earlier hitting $113.75 - its loftiest since September last year. It ended up with gains of more than $3 on Thursday.
U.S. crude touched an intraday high of $107.68, also a nine-month top, and was up 49 cents at $107.02, extending the previous session's $2.13 gain.
Both benchmarks are set to gain more than 4 percent this week, the biggest weekly rise since July 2013 for Brent and since December for U.S. crude.
"There have been no disruptions to oil supplies so far but people are very nervous," said Ken Hasegawa, a Tokyo-based commodity sales manager at Newedge Japan, referring to worries that escalating violence in Iraq could disrupt oil supplies from the second-largest OPEC producer.
The forces of Iraq's autonomous ethnic Kurdish north have taken control of the oil hub of Kirkuk as the troops of the Shi'ite-led government abandoned posts.
"Oil is now in a new price territory and is likely to climb more as investors rework their positions, supported by the uncertainty and technicals," Hasegawa said.
Given the break past key resistance at $105 a barrel, the U.S. benchmark may rise towards $112 over the next two weeks, the high touched last year, if it manages to break past the next ceiling of $110, Hasegawa said.
Brent may gain towards $115 over the same time period now that it has broken past $110, he said.
"Iraq has become a key supplier as it has managed to ramp up output quite rapidly and it has helped offset losses from other producers," said a source at an Asian refiner. "So if there is any disruption from Iraq, everybody is worried that the impact on the market will be serious."
Yet, producer group OPEC's latest forecast of the oil market being balanced in the second half of this year with extra production sufficient to meet growing demand, helped allay some concerns of disruption in supplies.
The cartel of 12 exporters said global oil inventories were comfortable. U.S. stockpiles were high and commercial stocks in the large developed economies were sufficient at the end of April to meet almost two months of consumption.
The unfolding geopolitical crisis overshadowed data out of the United States that showed retail sales rose less than expected in May and first-time applications for jobless benefits increased last week.
Investors are awaiting industrial output data from China due later in the day to gauge the demand outlook for the world's second-largest oil consumer. – Reuters