Brent crude traded close to its lowest closing level in a week after Iraq said oil exports from the south of country would still increase amid the northern insurgency.
Iraq’s crude exports will accelerate next month, Oil Minister Abdul Kareem al-Luaibi said on Wednesday, adding to signs that three quarters of the country’s production remains undisturbed in the south.
“The main oil production areas have not been affected yet so it’s normal we see a correction after such a big price increase,” said Gerrit Zambo, an oil trader at Bayerische Landesbank in Munich.
“But an outbreak of violence of this kind of course endangers production. The potential for less oil from Iraq is still there.”
Brent for August settlement fell 53 cents to $113.47 a barrel on the London-based ICE Futures Europe exchange today. It settled at $114 a barrel yesterday, the lowest closing price since June 17.
Brent may retreat to $110 a barrel because Iraqi output has been unaffected by the violence, said Jens Naervig Pedersen, an analyst at Danske Bank A/S in Copenhagen.
“The insurgence has so far not led to any disruption of supplies from Iraq to the global market and, in our view, the likelihood of this happening remains small,” Pedersen said.
“Hence, there is a good chance of a further price fall towards the $110 level the oil price was at before the chaos.”
Iraq’s Prime Minister Nouri al-Maliki yesterday rejected calls to relinquish power and allow the formation of a “national salvation” government to counter militants seeking to split the country. The nation is the second-biggest producer in the Organization of Petroleum Exporting Countries, after Saudi Arabia.
Violence in Iraq spread yesterday to Kirkuk, the northern region’s oil hub, where a car bomb killed at least seven people and wounded 20, according to a police statement.
It was the first attack there since Kurdish forces took control of the area two weeks ago after Iraq’s army fled the advance of the Islamic State in Iraq and the Levant.
