West Texas Intermediate fell as a technical indicator shows last week’s increase to the highest price in nine months was excessive. Brent in London dropped amid speculation Iraqi forces will slow the advance of insurgents.

Futures slid as much as 0.4 percent in New York. WTI’s relative strength index closed above 70 for a third day yesterday, signaling prices rose too quickly to sustain further gains, data compiled by Bloomberg show. Iraq’s army pummeled the positions of Sunni Muslim insurgents who have captured large chunks of territory in the country’s north as the U.S. weighed a military intervention to help the government.

“In the absence of a direct attack on Baghdad, we could see a further moderation in prices,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney who predicts investors may buy West Texas contracts if prices decline to about $105.25 a barrel. “We’ll need to keep a risk premium until there’s some sort of resolution. The key driver is the Middle East.”

WTI for July delivery fell as much as 46 cents to $106.44 a barrel in electronic trading on the New York Mercantile Exchange and was at $106.58 at 4:55 p.m. Sydney time. The contract lost 1 cent yesterday after ending last week’s trading at $106.91, the highest close for the front month since Sept. 18. The volume of all futures traded was about 5 percent above the 100-day average. Prices are up 8.3 percent this year.

Brent for August settlement dropped as much as 41 cents, or 0.4 percent, to $112.53 a barrel on the ICE Futures Europe exchange. The European benchmark crude traded at a premium of $6.81 to WTI for the same month, compared with $6.64 yesterday.

Iraq Crisis

Brent capped a 4.8 percent increase last week, the biggest gain since July, as escalating violence in Iraq fanned concern that supplies from the OPEC’s second-largest producer may be disrupted. WTI climbed 4.1 percent, the most since December.

Prime Minister Nouri al-Maliki’s Shiite Muslim-led government is seeking to reassert control over territory held by the Islamic State in Iraq and the Levant, a breakaway al-Qaeda group known as ISIL. The Organization of Petroleum Exporting Countries member pumped 3.3 million barrels a day of oil last month, according to data compiled by Bloomberg.

The U.S. may send a limited number of special-forces troops that would be involved in training rather than direct combat, the Associated Press reported, citing U.S. officials it didn’t identify. The Pentagon dispatched an aircraft carrier to the Gulf and the Navy said it sent another ship with 550 Marines.

U.S. Stockpiles

Kurdish troops are defending Iraq’s fourth-biggest oil field of Kirkuk after the Iraqi army abandoned the area last week amid ISIL’s offensive, Jabbar Yawar, the Peshmerga Ministry’s secretary-general, said in Erbil yesterday. The fighting hasn’t spread to the south, which the U.S. Energy Information Administration estimates is home to three-quarters of Iraq’s production.

In the U.S., crude inventories probably shrank by 750,000 barrels in the week ended June 13, according to the median projection of eight analysts surveyed by Bloomberg News before an EIA report tomorrow. Supplies decreased the prior two weeks to 386.9 million barrels, according to the Energy Department’s statistical arm.

Gasoline stockpiles slid by 550,000 barrels last week while distillates, including heating oil and diesel, expanded by 350,000 barrels, the survey shows. The industry-funded American Petroleum Institute in Washington is scheduled to release its own supply data today.

Bloomberg