Oil extended gains as signs of declining U.S. stockpiles pointed to healthy demand while investors weighed disruptions to supply because of global geopolitical tensions.
Futures in New York rose as much as 0.8 percent after adding 2.5 percent in the past three sessions. Flows of crude from northern Iraq through the Turkish port of Ceyhan have slumped, a port agent said Wednesday, a sign that fighting between the Baghdad government and Kurdish forces may be having a larger-than-expected impact on output in the oil-rich Kirkuk region. An industry report showed U.S. inventories fell last week, with government data Wednesday forecast to show a fourth straight drop.
Iraq is just one of the oil market’s geopolitical risks, with uncertainty also growing over tensions between Iran and the U.S., Goldman Sachs Group Inc. said Tuesday. The Persian Gulf nation said it would support an extension of OPEC output cuts to the end of 2018 and insisted its production plans won’t be disrupted by U.S. President Donald Trump’s disavowal of the nuclear deal that’s boosted its exports.
“With Iraq and the Kurds, the effect of geopolitical risks on oil production is starting to be priced in again,” said Hans Van Cleef, senior energy economist at ABN Amro. “That’s one of the reasons we think that oil prices can go up further. The inventory data is coming up later today — that will be another driver. After the hurricane I think there is a good chance that there is a bullish report, and that is starting to be priced in.”
West Texas Intermediate crude for November delivery rose as much as 43 cents to $52.31 a barrel on the New York Mercantile Exchange and was trading at $52.23 as of 1:55 p.m. in London. Total volume traded was about 44 percent below the 100-day average. Prices on Tuesday added 1 cent to close at $51.88, the highest since Sept. 27.
Brent for December settlement rose as much as 66 cents, or 1.1 percent, to $58.54 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.99 to WTI for December.
U.S. inventories fell by 7.13 million barrels last week, the American Petroleum Institute was said to report. Data from the Energy Information Administration Wednesday is forecast to show a 3.25 million-barrel slide.
While Iraq’s government is clashing with Kurdish forces in the north of the OPEC nation, raising the prospect of output disruptions in the region, both sides have an incentive to keep oil flowing due to low production costs and “high revenue” available per barrel, according to Goldman Sachs.
The Iraqi government offensive was triggered by a non-binding Kurdish referendum on independence that was approved overwhelmingly in September and made more politically charged by the regional government’s decision to include Kirkuk, even though it lies outside the semi-autonomous Kurdish region. The area is home to the country’s oldest oil field.
Other oil-market news:
The U.S. president’s statement on Iran was “chest-beating” and has “little or no effect” on the Islamic Republic’s oil plans, Amir Zamaninia, deputy minister for trade and international affairs at Iran’s Oil Ministry, said Tuesday. The oil market is slowly rebalancing as lower prices boost demand, Total SA Chief Executive Officer Patrick Pouyanne said at the Oil & Money conference in London on Wednesday. Oil companies will continue to reduce costs and break-even prices will fall into the $30-$40 range, BP CEO Bob Dudley said at the conference.
Recommended for you
Read the latest opinion pieces from our Energy Voice columnists
- Opinion: Changed days for operators and the supply chain?
- Does the UK’s subsea industry actually belong to the UK?
- Opinion: Ruling finally gives clarity over evidence for North Sea prohibition appeals
- Opinion: Scrap the shady underbelly of offshore industry
- Can The Shale Boom Avoid These Bottlenecks?