Crude oil weekly recap, June 30 – July 4

WTI and Brent futures closed the week for considerable losses as Iraqs oil-producing south was deemed safe, and Libya saw key developments towards restoring previous output levels. Soaring employment figures in top-consumer US were unable to lift crude contracts.

West Texas Intermediate futures for settlement in August closed for $103.77 per barrel on Friday on the New York Mercantile Exchange, down 0.28% for the day and logging about 1.9% weekly loss. Weekly high and low stood at, respectively, $106.09 per barrel on Tuesday and $103.64 per barrel on Friday. Last week the US benchmark lost 1%.

Meanwhile on the ICE in London, Brent futures due in August recorded a 0.32% daily drop to close for $110.64 per barrel on Friday, losing about 2.3% for the week. Brent’s premium to WTI stood at $6.87, widening last week’s closing margin of $7.56. Weekly high and low were at, respectively, $113.30 per barrel on Monday and $110.53 per barrel on Thursday. The European brand dropped about 1.3% last week.

“The dying-down of geopolitical tensions is clearly depressing oil prices,” Michael McCarthy, chief strategist at CMC Markets in Sydney, said for Bloomberg. “The market is removing some of the risk premium. West Texas has now fallen below the key support level of $105.25 a barrel, meaning that risks are now on the downside.”

Iraq

Iraqi military have had inconclusive fights with militants for the city of Tikrit. The army was urgently reinforced by Russian and Belorussian fighter aircraft, purchased by the government in haste. Elsewhere, militants tighten their grip on the northern provinces of the country, with the Kurdish semi-autonomous state recently joining the fight against the jihadists.

In Baghdad, the Iraqi government failed to elect a new leadership earlier this week, as Sunni-Muslim and Kurdish representatives boycotted the vote and the election body failed to reach a quorum. The current Iraqi government, led by PM Maliki, is said to be quite exclusive of ethnicities other than Shia-Muslims, which represent about 65% of Iraq’s population.

The Kurdish semi-autonomous government in northern Iraq has recently come under attack by ISIS, and its military is seen as stout defense of the major northern oilfield around Kirkuk. The Kurds occupied Kirkuk, which lies beyond the autonomous government’s borders, after the Iraqi army fled from the Islamists. Now the Kurds, who have long yearned independence, claim they will not leave Kirkuk before an independence referendum takes place.

The Iraqi government insists insurgents do not threaten Baghdad, nor the southern oilfields, which account for more than 75% of Iraqi oil output. Furthermore, the Iraqi oil minister said production and exports will actually increase over the next month.

Iraq is OPEC’s second-top oil producer, and exports some 3 million barrels per day from its main southern terminal at Basra.

Libya

Two oil-exporting ports in eastern Libya have been reopened after being closed for almost a year due to insurgency. The Es Sider and Ras Lanuf facilities are Libya’s biggest and third-biggest ports, and have a combined potential exporting capabilities of more than 0.5 million barrels per day. If they indeed reach optimal capacity they will increase Libya’s output five times, Bloomberg reported.

The rebels who had occupied the ports have handed them over to the newly elected government as a sign of support.

Libya’s output has dwindled since the ousting of former dictator Muammar Qaddafi, with exports dropping from 4 million barrels per day, to some 150 000 earlier this year. Libya holds Africa’s largest crude oil reserves.

US reports

Key US employment data was revealed this week. Nonfarm payrolls for June increased by 288 000, which is a four-year peak. ADP posted a 281 000 figure on Wednesday, and analysts had earlier suggested a growth of about 210 000. The unemployment rate dropped to 6.1%, which is the lowest rate since September 2008.

Also, ISM posted its non-manufacturing PMI for June, for a reading of 56.0, slightly below expectations and the figure from last month, but standing for a sizable growth in the sector nonetheless. A reading of 50 or higher means expansion of economic activities, and vice versa. The bigger the distance from 50, the greater the pace of contraction or expansion. The services sector accounts for about 80% of US GDP.

Previously, ISM revealed its June manufacturing for the US yesterday, for a slightly worse-than-expected growth, but still standing for a considerable growth for the factory sector.

Oil inventories

The US Energy Information Administration (EIA) posted its weekly oil inventories report for the seven day through June 27 yesterday. The log revealed a 3.155 million-barrel draw for commercial crude oil inventories, gasoline stocks dropped 1.235 million barrels, while distillates added 0.975 million barrels.

Refineries picked up pace, with gasoline production adding some 5% as summer driving season enters peak period.

Next week

Next week is somewhat lackluster in terms of economic data. China will post CPI and PPI figures for June on Wednesday. Minutes from the FOMC June meeting will be released also on Wednesday, while the ECB will post its monthly report on Thursday.