Brent Climbs On Iraqi Conflict

Brent crude oil got a boost on Friday morning after rising almost $1.00 on Thursday as geopolitical tension worsened and investors began to worry about supply interruptions. The commodity traded at $106.34 at 8:45 GMT as the US made plans for limited air strikes in Iraq.

On Thursday, President Obama announced that he had approved targeted air strikes in Iraq in an effort to keep Islamic State militants from further expanding their stronghold in the northern part of the country. However, Reuters reported that he promised he was not planning to send in ground forces and had no intention of beginning another war with Iraq.

The strikes mark an escalation in the fighting in Iraq and have the potential to disrupt Iraqi oil supplies. Until now, the region’s oil output has been relatively secure as most of Iraq’s oilfields are in the southern part of the country and the fighting has been isolated to the north.

Gains from the news of US involvement in Iraq were mitigated by the belief that markets are currently over supplied. Although the US economy has been on the rebound and will likely continue with a healthy oil demand, data from China has been mixed, suggesting that the nation’s recovery is still on shaky ground. In the eurozone, most are expecting things to continue worsening until the European Central Bank eases further. After the ECB’s meeting on Thursday, bank President Mario Draghi gave no indication that he was considering any more policy moves, and instead focused on the bank’s outlook for the euro in the coming months.