Oil Extends Two-Year High Amid OPEC Resolve, Iraq Disruptions

30/10/2017 12:58 AST

Oil extended a two-year high above $60 a barrel in London amid growing signs that OPEC and Russia will press on with supply curbs, and as pipeline flows from Iraq were disrupted. Brent crude futures added 0.3 percent. Saudi Arabian Crown Prince Mohammed bin Salman last week backed extending production cuts by the Organization of Petroleum Exporting Countries and its allies beyond March, following a similar endorsement by Russian President Vladimir Putin earlier this month. Iraq’s exports through its northern pipeline to Turkey have halted, according to a port agent.

“High OPEC compliance” and “roaring oil demand growth combined over the last few months have accelerated the rebalancing of the oil market,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “Reports that Saudi Arabia and Russia are mulling over the prospect of an extension” have “played a part in buoying market sentiment and recently lifting oil prices.”

Both Brent, the benchmark for more than half the world’s oil, and U.S. marker West Texas Intermediate crude have jumped in October amid speculation that OPEC and partners including Russia will prolong output cuts aimed at reducing a global glut. World stockpiles are down to about 160 million barrels above the five-year average and prices are heading toward “fair” levels, according to Qatar Energy Minister Mohammed Al Sada.

Brent for December settlement, which expires Tuesday, rose as much as 45 cents to $60.89 a barrel on the London-based ICE Futures Europe exchange, the highest since July 2015. It was at $60.61 at 9:42 a.m. in London. Prices gained 4.7 percent last week. The global benchmark crude traded at a premium of $6.78 to WTI.

WTI for December delivery was at $53.85 a barrel on the New York Mercantile Exchange, down 5 cents. Total volume traded was about 36 percent below the 100-day average. Prices on Friday advanced 2.4 percent to $53.90, capping a 4.7 percent weekly gain.

Oil flows were disrupted from the north of OPEC member Iraq, as bad weather shut the Turkish port of Ceyhan from which some of the country’s exports are shipped.

Pipeline flows from the Kurdish region to Turkey halted at 4 a.m. local time, stopping the movement of about 264,000 barrels a day, according to a port agent. The delivery of crude from fields in Kirkuk, recently reclaimed by the central government, was also suspended after a brief resumption last week. No reason was given.

Just before the weekend, the region’s Kurdish administration agreed a truce with the central Baghdad-based government following the Kurds’ earlier vote to secede from the country.

Bloomberg