Oil rises on expected fall in USA inventories, geopolitical tensions

Jon Howard
October 19, 2017

Crude prices have increased significantly this month just as demand seems sturdier compared to any point in previous months, especially in China.

After Iraqi government forces captured the major Kurdish-held oil city of Kirkuk on Monday in a response to Kurdish independence referendum, which increased concerns about oil supply, the oil prices held near their highest levels in nearly three weeks.

"Everyone is looking to see if the high level of (U.S.) crude oil exports will pull down inventories again", Kilduff said.

With supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) tightening the market, analysts have been raising their oil price forecasts.

Brent crude for December LCOZ7, +0.78% rose 33 cents, or 0.6%, to $58.21 a barrel-also on track for its highest finish since late September. 78 per barrel, slightly down from their last settlement, but 2 percent higher than last Friday and nearly a quarter above mid-June levels.

The Kurdistan region of Iraq has shut down some 350,000 barrels per day of production from major fields Bai Hassan and Avana, Reuters reports.

"Market participants will closely watch the rising oil-production profile in the United States and persistently high exports from the country - factors that will continue to limit gains in oil prices", said Abhishek Kumar, senior energy analyst at Interfax Energy's Global Gas Analytics in London. "Geopolitics and specifically geopolitical tensions have returned to the fore after being fanned by unrest in Iraq and rising hostility between the US and Iran", Stephen Brennock, an analyst at brokerage PVM Oil Associates Ltd, wrote in a note Wednesday.

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The ongoing political friction between the U.S. and Iran also increased the global risk for oil.

Last Friday, US President Donald Trump refused to certify Iran's compliance over a nuclear deal, leaving Congress 60 days to decide further action against Tehran.

"Oil and geopolitics are very much interlinked", Fatih Birol, executive director of the International Energy Agency, told Reuters.

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. It may take time to break above; meanwhile, crude oil prices could travel between $50 to $52.30 levels. On October 10, 2017, the Brent-WTI spread was $5.69.

Australian shares .axjo extended their winning streak to a fourth straight session to rise 0.6 percent, while Japan's Nikkei .n225 rallied for a sixth day to the highest since November 1996.

US inventories fell by 7.13 MMbbl last week, the American Petroleum Institute was said to report.

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