MARKET WATCH: Brent crude futures drop on concerns of Iraq’s stability

Crude oil futures prices fell on both New York and London markets during Jan. 6 trading, which analysts attributed to expectations of growing US petroleum supplies and concerns about the stability of Iraq’s ability to produce oil.

Analysts expect the US Energy Information Administration on Jan. 8 to report a supply build in US crude oil and product inventories, which would mark the first increase in 6 weeks.

Meanwhile international oil traders closely monitored the news as Iraqi forces planned attacks against militants who took over Fallujah and parts of Ramadi. US Sec. of State John Kerry said Jan. 5 that the US stands ready to help Iraq, but the administration has no plans to send troops.

Barclays Research analysts said Iraq’s stability is crucial to its oil production.

“The recent tidal wave of violence engulfing Iraq’s Anbar province poses serious concerns about the stability of the key oil-producing country as it heads into pivotal parliamentary elections in April,” Helima L. Croft of Barclays Research said in a Jan. 6 research note.

Croft noted Iraq’s energy infrastructure so far has been mostly shielded from the violence but that risks to the oil industry reportedly are rising. Croft said a key indicator would be whether Iraq’s Shiite militants retaliate on Sunni civilians, which could push Iraq toward the brink of civil war.

Separately, in western Libya, operator Repsol SA restarted production Jan. 5 at El Sharara oil field as had been expected (OGJ Online, Jan. 3, 2014).

Energy prices

The New York Mercantile Exchange February crude contract was down 53¢ on Jan. 6, closing at $93.43/bbl. The March contract dropped 56¢ to settle at $93.58/bbl.

Heating oil for February delivery lost a fraction of a penny to remain at a rounded $2.94/gal. Reformulated gasoline stock for oxygenate blending for February delivery also fell by less than 1¢ to remain at a rounded $2.65/gal.

The February natural gas contract on NYMEX edged up by less than a penny, settling at a rounded $4.31/MMbtu. On the US spot market, the Jan. 6 gas price at Henry Hub gained 15.9¢ to settle at a rounded $4.50/MMbtu.

In London, the February ICE contract for Brent crude oil fell 16¢ to close at $106.73/bbl. The March ICE contract for Brent lost 12¢, settling at $106.42/bbl. The ICE gas oil contract for January held steady at $910.25/tonne.

The Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes for Jan. 6 was $104.40/bbl, down 66¢ from the Jan. 3 settlement.

Contact Paula Dittrick at paulad@ogjonline.com.

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