Crude extended gains from the highest close in two weeks as speculation mounted over potential output disruptions in a region that’s home to Iraq’s oldest producing oil fields.
Futures in London rose as much as 1.3 percent after gaining 2.8 percent last week. Iraqi soldiers moved late Sunday to take over fields in the northern city of Kirkuk from Kurdish forces. That’s amid an intensifying conflict after the semi-autonomous Kurdistan Regional Government, or KRG, held a referendum on independence from Iraq on Sept. 25. Opec sees crude demand growing at a “healthy pace” over the next five years.
Brent crude has risen in six of the past seven weeks on signs output curbs by Opec and its allies are draining a glut. While exports of about 600,000 barrels a day from Kirkuk’s oil fields and deposits inside the adjacent Kurdish region were said to continue on Sunday, Eurasia Group estimates Iraq taking control could cut shipments by 450,000 barrels daily until the government repairs a pipeline to Turkey or reaches a revenue-sharing deal with the Kurds.
“Tensions are definitely escalating in Iraq at the moment, and it will be a supporting factor for oil prices for the time being,” said Kim Kwangrae, a Seoul-based commodities analyst at Samsung Futures Inc. “It’s a complex issue as it involves Kirkuk oil fields that produce about 550,000 barrels a day as well as the neighboring countries such as Turkey, which is threatening to cut off the pipeline.”
Brent for December settlement rose much as 73 cents to $57.90 a barrel on the London-based ICE Futures Europe exchange, and traded at $57.84 at 7:45 a.m. in London. Prices added 92 cents to $57.17 on Friday. The global benchmark traded at a premium of $5.68 to December West Texas Intermediate.
WTI for November delivery advanced as much as 54 cents, or 1.1 percent, to $51.99 a barrel on the New York Mercantile Exchange. The grade gained 1.7 percent to $51.45 on Friday. Total volume traded was about 3 percent above the 100-day average.
Iraq is the second-largest producer in the Organization of Petroleum Exporting Countries, pumping most of its 4.47 million barrels a day from fields in the south and shipping it from the Persian Gulf port of Basrah. The Kurdish region, meanwhile, relies on a pipeline to the port of Ceyhan in neighboring Turkey to get most of its crude to market. The conduit also transports some 100,000 barrels a day of oil from federal-run fields in Kirkuk.