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WTI and Brent prices dropped midday in Europe today, as investors eyed conflicts in Iraq and Ukraine, ahead of weekly US oil inventories reports. Meanwhile, natural gas futures climbed, as investors picked up on calls for warmer days in the US later this week.

WTI futures for delivery in September traded at $97.35 per barrel at 14:17 GMT on the New York Mercantile Exchange, down 0.74%. Prices ranged from $97.06 to $97.94 per barrel. The contract added 0.44% yesterday.

Meanwhile, September Brent on the ICE in London stood at $103.60 per barrel, down 1.03%, daily prices between a nine-month low of $103.35 and $104.61 per barrel. The contract’s premium to its US counterpart was $6.59, same as last session’s closing margin. Brent dropped 0.3% on Monday.

“None of the geopolitical developments impact short-term supplies,” Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd. in London, said in a report cited by Bloomberg. “Crude inventories are plentiful.”

Iraq

Iraqi President Fouad Massoum asked the deputy parliament speaker Haider al-Abadi to form a new government, in a move welcomed by the US. US President Barack Obama said the nomination was a “promising step forward”, and called on the new PM to form an inclusive government.

Incumbent PM Nouri Maliki has dubbed the nomination as unconstitutional, after accusing the President of “petty political schemes”, and said that he would “fix that mistake”. Monday saw troops and commandos personally loyal to Mr Maliki deploy at key points in Baghdad, as political developments take a turn for the worse amid the onslaught of the jihadists of the Islamic State (IS).

“Yesterday Baghdad was very tense,” a senior government official said for Reuters. “But key military commanders have since contacted the president and said they would support him and not Maliki.”

The US carried out air strikes on IS throughout the weekend, supporting the Kurdish forces. The aid was seen as a stabilizing factor the the country, and so far the insurgency has failed to affect output from OPEC’s second-top exporter.

Iraqi Oil Minister Abdul Kareem al-Luaibi said the country’s crude exports may exceed 2.5 million barrels daily in August, up 2.5% from July.

Ukraine

Russian President Vladimir Putin said there was a agreement with the International Red Cross and the Ukrainian government for a humanitarian aid mission to be sent into eastern Ukraine. The mission is said to deliver food, water, power generators and other essential goods to civilians with some 300 lorries, which have left Moscow for Ukraine early on Tuesday.

The Red Cross said it was not involved with the operation, though it had agreed in principal. The organization added that practical details need first be clarified, before a launch of an operation with its cooperation.

Meanwhile, Ukraine said it would not allow the convoy to enter, unless certain conditions are met. Kiev demanded it pass through a government-controlled border crossing and it be accompanied by Red Cross officials. Russian sources have said that the convoy will not enter Ukraine without Kiev’s permission.

The West has warned Russia not to use a humanitarian or peacekeeping mission as a pretext to send troops to Ukraine. NATO has more than once stated that Russia has combat ready troops on the borders, and enough in number to launch an invasion.

Moscow has dismissed a military intervention, insisting on the humanitarian nature of the convoy.

US inventories

The industry-funded American Petroleum Institute (API) will post its weekly reading on US oil stocks later today, before the official government report on Wednesday. A Reuters poll suggested crude stocks decreased by 2.2 million barrels last week, with gasoline dropping as well, while a Bloomberg survey projected 1.75 million barrels of crude were drawn, alongside 1.5 million barrels of gasoline.

Last week’s log revealed a 1.8 million-barrel draw for crude stockpiles, levels dropping to the lowest since late February. Gasoline stocks lost 4.4 million barrels, while distillate fuels, which include diesel and heating oil, were down 1.8 million barrels.

Natural gas

Natural gas for September traded at $4.000 per million British thermal units (mBtu) at 9:40 GMT on the NYMEX, up 0.88%. Prices ranged from $3.958 to a three-week peak of $4.020 per mBtu. The contract added 0.08% on Monday, after a 4.3% gain last week.

“We haven’t had a sustained heat wave for some time,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said for Bloomberg. “We’re flirting with $4, and that’s also bringing some buyers to the market.”

Experts forecast a sixteenth straight week of bigger-than-average builds for US natural gas inventories will be logged on Thursday. NatGasWeather.com suggested an injection of about 81-84 billion cubic feet will be posted on the Energy Information Administration (EIA) report, which will cover the week ended August 8.

Last week’s report revealed an 82 bcf build, well ahead of the 49 bcf average gain for the past 5 years.

“While bearish weather headwinds are quite strong, they will ease late next week with much warmer temperatures finally setting up over many high use states of the southern and eastern US,” analysts at NatGasWeather.com said in a note to clients today.

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