Oil market slides on profit taking, Iraq

LONDON, England – World oil prices sank further on Tuesday, July 1 on profit taking and a lack of developments on the Iraq crisis, analysts said.

In late afternoon London deals, Brent crude for delivery in August dived to $112.08 per barrel – its lowest level since June 9. It later stood at $112.15, down $1.15 from June 30’s closing level.

Elsewhere on June 27, US benchmark West Texas Intermediate for August fell 26 cents to $105.11 a barrel.

“The market continues to suffer from extended profit taking and little new developments on the geopolitical front, while global supplies and OPEC’s (Organization of the Petroleum Exporting Countries) spare production capacity (are) under no immediate threat for now,” said VTB Capital analyst Andrey Kryuchenkov.

Traders were however keeping a close watch on the security situation in major crude producer Iraq.

Islamist militants who have overrun swathes of territory in Iraq’s north on June 29 declared a caliphate – or Islamic state – in the regions under their control, as fighting with government and Kurdish peshmerga forces continued unabated.

The militants, who began a lightning offensive last month, have yet to directly threaten the key oil-producing region in the country’s south.

The violence in Iraq has a direct bearing on global crude prices because the country is the second-biggest oil exporter in the 12-nation OPEC after Saudi Arabia.

Iraq has more than 11% of the world’s proven resources and produces 3.4 million barrels a day.

“Oil prices (are) likely to remain supported in the months to come by the continuing conflict in Iraq,” said analyst Chris Beauchamp at trading firm IG.

Oil prices in Asia

Oil prices had risen in earlier Asian deals on July 1 as traders welcomed upbeat Chinese manufacturing numbers.

China’s manufacturing activity expanded at its fastest pace this year in June, an official survey showed July 1, in a sign that Beijing’s attempts to tackle slowing growth in the world’s number 2 economy are gaining traction.

The data is a key focus for the oil market because China is the world’s biggest energy consuming nation.

The official purchasing managers’ index (PMI) hit 51.0 last month, the National Bureau of Statistics said in a statement.

The figure is up from 50.8 in May and the best since a similar reading of 51.0 in December.

The index tracks manufacturing activity in China’s factories and workshops and is a closely watched indicator of the health of the economy. A reading above 50 indicates growth, while anything below points to contraction.

On June 30, crude futures had fallen amid signs of higher OPEC production.

Analysts said the market was pushed lower by indications that OPEC production had risen some 278,000 barrels per day in June to counter worries about potential attacks on Iraq’s oil facilities. – Rappler.com