Crude oil futures weekly recap, August 4 – August 8

WTI and Brent prices were quite stabel this week, trading within a narrow range. Flares in Ukraine, Iraq and Gaza stoked some risk-off mentality, while a seasonal drop for US inventories also failed to lift prices significantly higher.

WTI futures for September delivery on the NYMEX closed the week at $97.54 per barrel, down 0.2% since last Friday. Weekly high and low were at, respectively, $98.67 per barrel on both Monday and Tuesday, and $96.55 per barrel on Thursday, which was also a seven-month low. The contract lost 4.2% last week.

Meanwhile, September Brent on the ICE in London closed at $104.77 per barrel, for a minor weekly gain. Prices ranged from a five-month low of $104.69 to $107.45 per barrel. Brents premium to WTI closed at $7.23. The European benchmark lost some 3.3% last week.

Middle East tensions

Iraq was again in the spotlights of oil markets, after US President Barack Obama announced the US will be carrying out air strikes on militants of the Islamic State (IS), should they threaten its personnel in autonomous Kurdistan in the north of the country. President Obama dismissed the possibility of sending in ground forces, saying he would not let the US be dragged in another war in Iraq.

Also, President Obama said the US would strike on the Islamists if they march on Baghdad, and if they maintain their blockade of Mount Sinjar, where tens of thousands of civilians fled to from the IS. In addition to military support, Mr Obama said the US would provide humanitarian air drops to the civilians, who were left without food, water or any sanitation. 40 children were already reported to have died in the mountain.

“We have the unique capabilities to help avert a massacre, [and] I believe the United States of America cannot turn a blind eye,” Obama said. “We can act, carefully and responsibly to prevent a potential act of genocide.”

The move comes as the international community was growing more concerned with the security of civilians in Iraq, with UN Secretary-General Ban Ki-moon saying he was “deeply appalled”, and Pope Francis urging the international community to do more to protect innocents.

“It’s a catastrophe, a tragic situation: tens of thousands of terrified people are being displaced as we speak,” said Joseph Thomas, the Chaldean archbishop of the northern city of Kirkuk.

Iraq is OPEC’s second biggest oil exporter, with an output of about 3 million barrels daily. Most of it comes from the south of the country, widely seen as safe from militants. Some 200 000 barrels per day are produced in the north of the country, in autonomous Kurdistan, which is now in bitter fights with IS.

Elsewhere, the conflict in Gaza flared back to life, after the 72-hour truce expired without an agreed extension late on Thursday. Renewed rocket attacks and Israeli air strikes marked the resumption of military actions.

Israel had proposed an unconditional extension to the ceasefire, demanding a full demilitarization of Gaza in order to lift the suffocating blockade of the enclave. Hamas declined the offer, saying its fighters are ready for a “long war”.

Since the conflict sparked back to life exactly one month ago, more than 1800 Palestinian, mostly civilians, and 67 Israelis have died.

Russian counter-sanctions

Russia responded to Western sanction by introducing its own limitations to foreign trade on Thursday. Russian Prime Minister Dmitry Medvedev said Russia bans the import of meat, fish, dairy products, fruit and vegetables from the US, EU, Canada, Australia and Norway for a period of 1 year.

The counter-sanctions were ordered by Russian President Vladimir Putin on Wednesday and is a retaliation to the most-recent and toughest yet Western measures, which targeted the Russian sectors of the defense, energy, high-tech and finance.

The move comes as NATO warned of a possible Russian incursion in Ukraine, in light of fresh battle-ready troops massing near the border.

Nato chief Anders Fogh Rasmussen said Ukraine’s freedom and future were “under attack,” promising support against Russian “aggression”, the BBC reported. Russia “should not use peace-keeping as an excuse for war-making.”

Meanwhile fighting rages in eastern Ukraine, with heavy shelling reported in the rebel bastion of Donetsk, while a Ukrainian military aircraft was shot down. Several civilians were also reported killed.

Russia is the world’s leading energy exporter, and the souring of relations with the West has so far not affected natural gas and oil exports. Some analysts, however, are seeing a new Cold War in the making, and every rise in tensions worries investors.

US, China data

China, the world’s second-top oil consumer, posted monthly foreign trade data today. Export surprisingly soared 14.5% on an annual basis in July, while imports dropped 1.6% from a year ago, also to the markets’ surprise. The country’s crude oil imports rose 2.1 percent in July from the previous month to 23.76 million tonnes, the data showed.

Previously, the US Department of Energy’s statistical arm, the Energy Information Administration (EIA) posted its weekly report on US oil inventories on Wednesday. The log covers the week through August 1, and 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.

Next week

Next week will start off with a gauge on German economic sentiment, ahead of CPI, GDP and industrial production figures for the Eurozone. The US will post key readings on PPI, retail sales and industrial production, as well as University of Michigans preliminary reading on consumer sentiment. China will report on investments, retail sales and industrial production.