SINGAPORE: Brent crude dropped under $114 a barrel on Thursday as most of Iraq's oil output remained unaffected by the militant insurgency in the country, although worries over the conflict kept a floor under prices. Iraq's southern oilfields, which produce the majority of the nation's 3.3 million barrels a day, remained safe, said Nickolay Mladenov, United Nations special envoy to Iraq.
But insurgents and Iraq government forces continued to fight on Wednesday for control of Iraq's largest refinery, the 300,000 barrel per day Baiji complex, with troops being airlifted into the site by helicopter.
"The southern part of Iraq has not been affected by any insurgency," said Yusuke Seta, commodity sales manager at Newedge Japan. Oil shipments from OPEC's No.2 exporter are likely to be around 2.7 million barrels in June, Seta said, similar to last month.
"The $113-$114 level is a reasonable and comfortable range (for Brent) at the moment." "The downside risk is very, very limited in the current market conditions. With the geopolitical risk from Iraq, Libya, Iran and Ukraine, it's difficult to see a downside," said Tetsu Emori, commodity fund manager at Tokyo's Astmax Investment. Brent's current floor is at $112.50, while West Texas Intermediate's stands at $105.50, Emori said.
Brent crude had slipped 15 cents to $113.85 by 0645 GMT, falling in the past four sessions after hitting a nine-month high of $115.71 last Thursday.
US crude rose 13 cents to $106.63 a barrel. It had gained 47 cents to $106.50 in the previous session on news Washington would allow exports of condensate, an ultra-light oil, in a marginal relaxation of a 40-year ban on US oil exports.
"Talking to traders they are keeping a close eye on the US They need to know how much condensate will be available to Asia. There is nothing concrete but exports could start as early as August," said Seta.
Enterprise Products Partners, one of two companies that were given Department of Commerce approval on Tuesday to export condensate said on Wednesday it could start exporting any time.
GOING UP
US crude inventories unexpectedly rose by 1.74 million barrels last week to 388 million barrels, according to data from the US Department of Energy's Energy Information Administration.
But US demand should remain buoyant because the country is in the peak summer driving season, Emori said.
Refinery crude runs rose by 275,000 barrels per day last week, EIA data showed, while gasoline stocks climbed by 710,000 barrels.
Investors are also keeping an eye on the threat of further sanctions on Russia by western powers if Moscow does not do more to defuse the conflict between pro-Russian separatists and Kiev in eastern Ukraine.
Meanwhile, two weeks of talks between Iran and six world powers to reach a final agreement over Tehran's nuclear programme will start in Vienna on July 2, Russia's ambassador to the UN said on Wednesday.
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