28 September 2017, London — Oil prices rose on Thursday, spurred by rising tension around northern Iraq following the autonomous Kurdistan region’s vote in favour of independence in a referendum.
Brent crude oil LCOc1 was up 60 cents at $58.50 a barrel by 0945 GMT. It hit a more than two-year high of $59.49 on Tuesday after Monday’s referendum vote prompted Turkey to threaten to close the region’s oil pipeline.
U.S. light crude CLc1 was 60 cents higher at $52.74 after reaching a five-month intra-day high of $52.86 a barrel.
“Kurdistan and Northern Iraq now export 500,000-550,000 barrels per day (b/d). That would be a big loss to the market,” said Tamas Varga, an analyst at London brokerage PVM Oil Associates.
Iraqi Kurdistan voted overwhelmingly on Monday in favour of independence, prompting Turkish President Tayyip Erdogan to say he could use military force to prevent the formation of an independent Kurdish state and might close the oil “tap”.
Turkey promised on Thursday to deal only with the Iraqi government on crude oil exports, “restricting oil export” operations to Baghdad, the office of Iraqi Prime Minister Haider al-Abadi said.
U.S. crude prices found some strength from a surprise fall in U.S. stocks.
U.S. crude inventories USOILC=ECI fell 1.8 million barrels last week, the U.S. Energy Department said, versus forecasts for a 3.4 million-barrel build.
U.S. refiners are still returning to full operations after Hurricane Harvey last month, but gasoline stocks surprisingly rose and stocks of distillates fell less than anticipated.
While this week’s U.S. data gave a mixed picture, the outlook for global oil demand has strengthened, analysts say.
The International Energy Agency earlier this month raised its 2017 global oil demand growth estimate to 1.6 million b/d from 1.5 million b/d, citing stronger than expected demand growth in the United States and Europe.
Still, U.S. crude production rose to 9.55 million bpd last week, higher than before Harvey hit the Gulf Coast.
With Brent futures commanding their highest premium over U.S. crude WTCLc1-LCOc1 in more than two years, U.S. crude has become increasingly competitive in foreign markets and exports hit a record 1.5 million b/d last week.
That complicates efforts by the Organization of the Petroleum Exporting Countries and other major producers to push oil higher through output curbs, as every rise in price encourages more U.S. production.
*Christopher Johnson; Aaron Sheldrick; Editing: Susan Fenton & David Clarke – Reuters