Oil Benchmarks Diverge as Iraq Concerns Boost Brent

NEW YORK--The global oil benchmark rose Tuesday on continued uncertainty about Iraqi oil production, though the country's exports have yet to be affected by ongoing violence.

Brent crude on the ICE futures exchange rose 34 cents, or 0.3%, to $114.46 a barrel. Light, sweet crude for August delivery settled down 14 cents, or 0.1%, at $106.03 a barrel on the New York Mercantile Exchange.

U.S. oil prices fell, as traders bet that the price difference between the two contracts would widen, said Stephen Schork, analyst at The Schork Report. Buying one benchmark oil contract and selling another to wager on the size of the price gap, or spread, is a common trade.

The spread between Brent and West Texas Intermediate, the U.S. benchmark, widened by 48 cents to $8.43 a barrel.

Brent typically reacts more strongly to geopolitical tensions. U.S. prices are less vulnerable to global supply swings, because U.S. oil production is high and most domestic crude can't be exported.

Both contracts have traded near nine-month highs in the past two weeks on concerns that an insurgency in Iraq could disrupt the country's oil output. At this point, Iraq's exports haven't been halted.

"With any sort of fear premium that's getting priced in, you're going to see that reflected in the spread moving out," Mr. Schork said. "You're just seeing a lot of money flowing into the spreads."

Market participants are also waiting for weekly inventory data from the U.S. Energy Information Administration set to be released Wednesday at 10:30 a.m. EDT.

Analysts expect the agency to report that domestic oil stockpiles fell by 1.2 million barrels last week, according to a Wall Street Journal survey.

Gasoline supplies are expected to rise by 1.2 million barrels, and stocks of distillates, including heating oil and diesel, are expected to gain 800,000 barrels.

The American Petroleum Institute, an industry group, is scheduled to release its inventory data for the same period later Tuesday.

Front-month July reformulated gasoline blendstock, or RBOB, settled up 1.82 cents, or 0.6%, at $3.1258 a gallon. July diesel settled up 0.9 cent, or 0.3%, at $3.0416 a gallon.