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Crude Rallies on Geopolitical Tensions

David Becker
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Crude oil prices surged on Thursday as military advances by Islamic insurgents in northern Iraq have started to create an impact on global oil futures. Iraq may evolve as a significant wild card, in oil-trading following the loss of a second major city to insurgents. Prices are likely to climb if tensions continue to rise. Inventories in the US remain tight and demand continues to rise according to the latest report from the Department of Energy.

Oil traders bid up prices of WTI after gunmen from the Islamic State of Iraq and al-Sham, an al Qaeda offshoot known as ISIS, took over the streets of Mosul and Kirkuk. July futures for benchmark WTI jumped nearly $1.5 per barrel on Thursday, and are trading above $105 per barrel.

Crude oil prices were boosted by better than expected inventory data released by the EIA. U.S. commercial crude oil inventories decreased by 2.6 million barrels from the previous week. Gasoline inventories increased by 1.7 million barrels last week, and are in the middle of the average range. Distillate fuel inventories increased by 0.9 million barrels last week but are below the lower limit of the average range for this time of year.

Demand for products such as gasoline, distillates and jet fuel continue to climb. Total product demand over the last four-week period averaged about 18.8 million barrels per day, up by 1.6% from the same period last year. Over the last four weeks, gasoline demand averaged about 9.1 million barrels per day, up by 2.8% from the same period last year. Distillate fuel demand averaged 4.0 million barrels per day over the last four weeks, up by 1.1% from the same period last year. Jet fuel demand is up 5.5% compared to the same four-week period last year.

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