The price of oil dropped Tuesday after the U.S. said it was deploying a small group of troops to Iraq, which helped soothe fears somewhat over the prospect of a broader conflict that could disrupt crude supplies.
Benchmark U.S crude for July delivery dropped 29 cents to US$106.61 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost 1 cent to settle at $106.90 on Monday.
Brent crude, a benchmark used to price international oils, fell 33 cents to $112.61 a barrel on the ICE Futures exchange in London.
Up to 275 U.S. soldiers are being positioned in and around Iraq to protect the U.S. Embassy and other American interests as President Barack Obama weighs options for dealing with the al-Qaeda inspired militants who have captured a vast swath of the country’s north.
Iraq’s crude oil exports have so far not been disrupted but the conflict raises concern about whether the country can rebuild its oil infrastructure and meet global demand.
“The fact that the U.S. are looking to send a small, yet targeted force into the region has appeased some, although the situation is extremely fluid and the prospect of higher energy prices is still something that could feasibly occur over the coming weeks,” Craig Weston, chief market strategist at IG Markets in Melbourne, said in a report.