4 Aug 2014

WTI Trades Near Six-Month Low Before Economic Data; Brent Holds

                  West Texas Intermediate crude traded near the lowest price in six months before data that will signal the strength of the economy in the U.S., the world’s biggest oil consumer. Brent was steady in London.
Futures were little changed in New York after capping the biggest weekly decline in seven months on Aug. 1. The Markit Economics purchasing managers index for U.S. services is due tomorrow, while factory order data is also scheduled this week. In Iraq, militants took control of two oil fields in the north after clashes, according to the Northern Oil Co.
“There is no fear about supply,” said Ken Hasegawa, an energy trading manager at Newedge Group in Tokyo. “On technical charts, we saw big drops last week, and both WTI and Brent are down to one of the support levels. WTI is very close to $97.50 a barrel and Brent to $104 a barrel. If those levels hold, the market will rebound.”
WTI for September delivery was at $98 a barrel in electronic trading on the New York Mercantile Exchange, up 12 cents, at 1:15 p.m. Singapore time. The contract slid 0.3 percent to $97.88 on Aug. 1, the lowest close since Feb. 6. The volume of all futures traded was about 1.3 percent above the 100-day average. Prices are down 0.5 percent this year.
Brent for September settlement rose 21 cents, or 0.2 percent, to $105.05 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $7.08 to WTI. It closed at $6.96 on Aug. 1.

Fuel Demand

WTI declined 4.1 percent last week amid signs of weaker U.S. fuel demand. Gasoline supplies rose to the highest level in four months as average consumption of the fuel dropped to the lowest since May, even after the country’s peak driving season started with the Memorial Day holiday on May 26.
Markit’s final reading of a gauge for U.S. services is projected to be 60.8 in July, down from 61 in June, according to a Bloomberg News survey. Factory orders probably rose to 0.6 percent in June, a separate survey shows.
Hedge funds and other money managers trimmed their bullish bets on WTI, extending the drop from this year’s peak in June to 22 percent, U.S. Commodity Futures Trading Commission data show. Net-long positions fell 1,375 to 276,741 futures and options combined in the week ended July 29, according to the CFTC.

Mideast Unrest

In Iraq, the Ain Zala and Batma oil fields are under full control of Islamic State, a breakaway al-Qaeda group, according to the state-run Northern Oil Co. Together they have an output of 30,000 barrels per day. The Sunni Islamist militants last month occupied the Qayyara field north of Baghdad.
Fighting has spared supply from Iraq’s south, home to more than three-quarters of its crude output. The nation is the second largest producer in the Organization of Petroleum Exporting Countries, pumping 3 million barrels a day in July.
In Libya, Britain dispatched its navy to evacuate its nationals as 22 other people were killed as a result of militia feuds near Tripoli’s international airport. The nation is the holder of Africa’s biggest oil reserves.

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