Oil Edges Higher on Gains as Geopolitical Threats Intensify in Kirkuk, Iran

Posted October 19, 2017

Global supply and demand for crude oil will be largely balanced next year, as growth in consumption helps and an output curb works its way through stocks, the IEA said in its monthly report.

Oil extended gains as signs of declining US stockpiles pointed to healthy demand while investors weighed disruptions to supply because of global geopolitical tensions.

After months of range-bound trading during which Opec-led supply cuts supported crude values but rising U.S. output capped markets, prices have moved up significantly this month.

US crude oil futures settled at $51.87 per barrel, up 42 cents or 0.82 percent, while Brent settled at $57.82, up 1.2 percent on the day.

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The ongoing political friction between the U.S. and Iran also increased the global risk for oil. "If there [were new sanctions], we expect that several hundred thousand barrels of Iranian exports would be immediately at risk", Goldman said. U.S. light, sweet crude was 25 cents higher at $52.12.

Oil prices firmed on October 17, building on gains made as fighting between Iraqi and Kurdish forces threatened supplies from northern Iraq while tension rose between the USA and Iran.

“Kirkuk, the main city in the region, produces around 10 percent of Iraq's total oil output and any (further) disruption could therefore have a significant impact on supply, ” said William O‘Loughlin, investment analyst at Rivkin Securities.

Conflict would hit oil exports from Iraqi Kurdistan, now estimated at around 650,000 barrels per day.

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Prices had risen on Monday after Kurdish technicians stopped oil production in those two fields.

However, inventories of gasoline and diesel rose, the latter unexpectedly, reviving some concerns about elevated stockpiles during a time when demand for petroleum products declines.

US President Donald Trump refused to confirm Iran's compliance over a nuclear deal that has left Congress 60 days to consider implementing new sanctions against the country. Both contracts traded up almost 1 percent and down over 1 percent during the day. The cuts are likely to be shared again by non-OPEC members led by top oil producer Russian Federation, which lessened output joining OPEC from January.

Efforts by the Organisation of the Petroleum Exporting Countries (Opec) and Russian Federation to restrict supply have eaten into reserves in industrialised economies.

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“We see Brent averaging $54 this quarter and $52.50 per barrel in 1H18, compared with our previous forecasts of $50 and $49.50 per barrel, respectively, ” Bank of America Merrill Lynch said.