IPE Brent falls on death of Iraq's al-Qaeda leader Zarqawi

London (Platts)--8Jun2006

IPE Brent futures in London extended losses Thursday, falling over a
dollar earlier after Iraq's prime minister announced the death of Iraq's
al-Qaeda leader, Abu Musab al-Zarqawi, in an airstrike.
At 1105 London time, the July front-month IPE Brent futures traded at
$68.25/barrel, down 94 cents/barrel but had dipped below $68/barrel setting a
new two week low of $67.97/barrel.
"The market is using the killing of al-Zarqawi as an excuse to sell out
of the market. If this was a bullish market then that news wouldn't have had
any impact on prices," a London-based broker said.
Earlier Thursday, Iraqi Prime Minister Nuri al-Maliki announced that
al-Zarqawi had been killed in an airstrike outside the Iraqi city of Baquba.
"I don't really believe that the killing is really going to help Iraqi
oil supplies. It's not as though al-Qaeda have been particularly publicly
active recently." a trader said.
Brokers believe that the market has been looking for a reason to take a
breather and come off the prices above the $70/barrel mark. Market players
feel that the $67.50/barrel level for WTI crude futures is the critical
support level dictating where prices will go.
"If we get down to $67.50 for front-month WTI and go through it then the
market is going to come off a lot further. If it doesn't like it we'll be
going straight back up and continue to trade in a $7 range as we have done for
the past couple of months," a broker said.
Front-month WTI touched the $67.50/barrel mark on May 22nd but rebounded
strongly off this support level.
The fall in prices Thursday continued a downward trend which has now
lasted for the past four trading sessions. July IPE Brent has fallen almost
$5/barrel since the start of the week.
A lot of the selling earlier in the week had come from expectations of
bearish US stock data. On Wednesday the Energy Information Agency and American
Petroleum Institute confirmed the bearish tone by reporting builds in both
crude and product stocks.
The EIA reported a 1.1 million barrel build in crude stocks to 346.6
million barrels, in contrast to expectations for a 400,000 barrel draw. At
this level crude stocks are "well above" the upper end of the average range
for this time of year, EIA said in its weekly report. The API showed 348,000
barrel rise.
Gasoline stocks, currently the main market mover, meanwhile, gained 1
million barrels according to the EIA, less than the 1.8 million analysts
expected. The API showed larger builds than expected with a rise in
2.4-million barrels. However, gasoline inventories climbed 7.623 million
barrels in May compared to 2.953 million barrels the same month 2005.

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