Oil below $105 as Iraq pumps crude despite conflict

- Brent crude oil slipped below $105 a barrel on Monday as U.S. intervention in Iraq eased concerns over the risk of disruption to supply from OPEC's second-largest producer.

Oil jumped sharply at the end of last week as Islamic State fighters made rapid gains in parts of northern Iraq and came within striking distance of more of the country's oilfields.

But U.S. air strikes on the Sunni insurgency calmed market worries over the risk to oil production, helping pull prices lower again.

Oil exports from southern Iraq are near record levels and the Kurdistan Regional Government's (KRG) oil pipeline via Turkey is operating normally and pumping 120,000 barrels per day

(bpd) of crude oil.

Iraqi Kurdistan said on Friday its oil output remained unaffected.

Brent was down 12 cents at $104.90 a barrel by 1255 GMT. The contract jumped more than $1 to hit a weekly high of $106.85 on Friday before settling 42 cents lower.

U.S. crude was up 7 cents to $97.72 a barrel.

"The oil market is not as worried now about what is happening in Iraq," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt.

"The market has become more complacent about supply again. But complacency is dangerous. Given the geopolitical tensions, a spike in oil prices cannot and should not be ruled out."

Oil markets are well supplied in most parts of the world, and North Sea crude oil for immediate delivery is trading at a discount of $1 to $2 below the Brent futures front month.

Simon Wardell, analyst at Global Insight, said the market's focus was on how fast-moving events in Iraq might unfold.

"There's talk of changes in Baghdad. The oil market is sort of waiting to see what happens," Wardell said.

Prompt Brent prices are unlikely to move higher unless there's a significant disruption in supply, analysts argue, although prices have risen in the future months on concerns about future output growth.

"Oil markets are now well supplied, but forward futures prices suggest the low prices won’t last," Fritsch said.

Ample OPEC production has also weighed on oil prices. OPEC said its members increased output in July despite violence in Iraq and Libya while trimming its 2014 demand growth forecast.

Source: Reuters

Copper gains on easing Ukraine tensions, optimism about China's Economic outlook.Zinc rebounds although rising LME stocks weigh on prices

 Copper prices rose slightly on Monday as tensions eased between Russia and Ukraine and on optimism about the outlook for China's economy and metals demand, though expectations of rising copper supplies put a brake on gains.

Three-month copper on the London Metal Exchange

(LME) traded at $7,005 in official rings, up 0.2 percent. It ended the previous week lower for the second week in a row, down 1.1 percent.

Russia's defence ministry said on Friday it had finished military exercises in southern Russia, which the United States had criticized as a provocative step in the Ukraine crisis.

European shares bounced back from a sharp two-week slide, in a move that helped support risk appetite. [.EU]

"There are indications of some easing in geopolitical tension over the weekend, and that is helping the equity markets. Base metals are benefiting from that," said Nic Brown, head of commodity research at Natixis.

Investors were monitoring the situation in the Middle East, with a focus on turmoil in Iraq and on talks in Cairo between Israel and the Palestinians on ending the month-old Gaza conflict.

Robust Chinese export numbers on Friday pointed towards healthy metals use. But solid trade data has yet to be seen globally, with particular questions over the impact of Russian sanctions on the European economy and demand for metals.

This week, industrial production data from China and the United States should paint a clearer picture about the health of the global economy.

"The data from China has been improving for a while now, and the gradual loosening of monetary conditions has been supportive to growth," Brown said.

Investors are concerned, however, that prices for the metal used in power and construction are likely to come under pressure in the second half due to rising supply.

The copper market is expected to be in a 226,000 tonne surplus by the end of 2014, a Reuters poll in July showed, with the surplus seen rising to 285,000 tonnes in 2015

Reflecting a drop in enthusiasm for copper holdings, hedge funds and money managers cut their bullish bets in copper markets in the week to Aug. 5, the Commodity Futures Trading Commission said on Friday.

In other metals, aluminium traded at $2,033 a tonne, up 0.4 percent. The discount to three-month prices narrowed to $4.25 per tonne on Friday, its biggest discount since December 2012, reflecting tightening supplies.

Zinc , untraded in official rings, was bid at $2,311 a tonne, up 0.7 percent, rose 0.9 percent, rebounding after hitting its lowest in more than three weeks in the previous session. Prices have been weighed down by rising inventories, with LME stocks increasing by more than 5 percent this month. 

Lead traded at $2,255 a tonne, up 0.7 percent and nickel traded flat at $18,560 a tonne. Tin , untraded in official rings, was bid at $22,350, down 0.1 percent.

In industry news, Michael Farmer, among the world's most famous metals traders, said he had no intention of abandoning the market that earned him his fortune after he was named baron of the British House of Lords. 
  



Source: Reuters