INV: Oil price: Brent decline halts on violence in Iraq, Libya
iNVEZZ.com, Monday, July 14: Brent crude has been trading above $106 a barrel so far today, slightly higher than a 97-day low touched in the morning session, as renewed prospects of supply disruptions lend support to the price. Brent has fallen 7.4 percent since June 20, as violence in Iraq did not affect the country’s crude output and as Libya’s oil crisis seemed to be headed toward a conclusion.
On the ICE Futures Europe exchange Brent for August delivery was up 0.41 percent at $106.93 a barrel as of 10:18 BST. The price is 1.9 percent below its 200-day simple moving average, while its 14-day relative-strength index stood at 29.31, below the level of 30, which some technical analysts view as a sign the underlying instrument is oversold. The August contract settled at $106.66 on Friday, its lowest close since April 7.
"I've been a bear on oil. I still feel bearish but I feel it's gone too far," Jonathan Barratt, chief executive of Sydney commodity research firm Barratt Bulletin, told Reuters. Barratt thinks that uncertainty over a deal with Iran, renewed hostilities in Libya on Sunday, a bomb attack close to Baghdad over the weekend and the continuing geopolitical tensions in Ukraine have created a “whole basket of worry.”
"It's the complete picture [in the Middle East]. We all know how anything can flare up," he said. Yusuke Seta, a commodity sales manager at Tokyo's Newedge Japan, holds a similar view. "To me the oil markets have overshot. Investors didn't expect it to fall to that level," he told the London-based news agency. "The Iraq issue should drag on for a while, which will support Brent," he argued. He sees Brent trading between $107.50 and $108 by Friday, while he does not think US crude would break below $100.
Seven people lost their lives and 36 were wounded yesterday in clashes between armed militias and forces from Libya’s ministries of Defence and the Interior for control of Tripoli’s international airport, according to al-Jazeera. Tunisia is going ahead with preparations to host a meeting of the foreign ministers of Libya’s neighbours to discuss the security situation in the country.
As the July 20 deadline for a deal between Iran and six world powers approaches, major differences between the parties remain, US Secretary John Kerry said on Sunday. “We have some very significant gaps still, so we need to see if we can make some progress, and I really look forward to a very substantive and important set of meetings and dialogues,” said Kerry.
Iraqi police reported that gunmen had killed at least 33 people, including 29 women, in an attack on two buildings in a housing complex in Baghdad yesterday, according to the Guardian.
“Oil supply in Iraq remains unaffected, Libya is returning, which means the supply risks are receding,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, told Bloomberg by e-mail. “It seems that speculators are leaving the market and exacerbating the downtrend. But the supply risks are not gone for good, so the downside is rather limited from here,” he argued.
The front-month West Texas Intermediate futures were down 23 cents to $100.46 a barrel as of 12:16 BST on the New York Mercantile Exchange (NYMEX).
The chart below plots the recent movements of both ICE Brent and NYMEX WTI as percentage changes.
