Brent trades around $107 as Russian oil supply seen safe
LONDON (Bloomberg) -- Brent crude traded near $107 amid speculation that supplies from Russia, the world’s biggest energy exporter, will be unaffected by the downing of a Malaysian Air flight.
Futures dropped for a second day. President Vladimir Putin defied international anger over Russia’s alleged role in the shooting down of the jetliner in Ukraine as the U.S. and Europe threatened further sanctions against his increasingly isolated country. West Texas Intermediate traded near a two-week high as higher refinery processing reduced U.S. crude inventories.
“Geopolitical risk is right now the driver of the market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “There is easing concerns that the downing of the airplane will impact oil supplies. It seems the market is stabilizing.”
Brent for September settlement slid 22 cents to $107.02 a barrel at 9:01 a.m. New York time on the London-based ICE Futures Europe exchange. The volume of all futures traded was about 13% below the 100-day average for the time of day.
WTI for August delivery, which expires July 22, gained 25 cents to $103.38 a barrel on the New York Mercantile Exchange. The more-active September future was unchanged at $101.95. The U.S. benchmark crude was at a discount of $5.07 to Brent on the ICE, down from $5.29 on July 18.
The expiration of the August contract “is probably boosting the price” of the front-month contract, said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.
Brent and WTI jumped on July 17 after the airplane was shot down. The crash site at Grabovo, less than 60 miles from Russia, has become a focus of international outrage as armed rebels hovered over the investigation, making reclamation of wreckage and corpses more difficult. A total of 282 bodies have been found, the Ukrainian government said July 21.
Russia’s relations with the rest of the world are deteriorating four months after its annexation of Ukraine’s Crimea region sparked Europe’s biggest geopolitical crisis since the end of the Cold War.
“The concern about Russia is keeping the market higher,” said Flynn. “But it appears that there is no imminent threat to oil supply.”
In Libya, the holder of Africa’s biggest oil reserves, rockets and rocket-propelled grenades damaged aircraft as week-long clashes continued near Tripoli International Airport. The unrest flared as the government prepared to resume crude exports from two terminals in the country’s east after regaining control of the facilities from rebels.
The violence is putting recovery of supply at risk, according to Barclays Plc. “What we are seeing now is a very fragile recovery,” analyst Miswin Mahesh said by email.