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Oil rises 1 per cent following Iraqi Kurdish conflict

17 October 2017

U.S. crude prices were also supported by drillers cutting back the number of rigs looking for new production.

Fears of renewed USA sanctions against Iran also bumped prices higher.

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. Brent crude climbed 1.2 percent to $57.88 per barrel.

Iraqi forces on Monday clashed with fighters from Iraq's semi-autonomous Kurdish region in the oil-rich province of Kirkuk, in a continuing standoff over Kurdish independence. There were unconfirmed reports that Kurdish forces had terminated about 350,000 barrels per day (bpd) of oil production from major fields. On Friday, US President Donald Trump refused to certify Iran's compliance over a nuclear deal, leaving Congress 60 days to decide on further action against Tehran.

Major producers including OPEC members had past year made a decision to curb crude oil production to 18 lakh barrels per day in order to push the prices to approximately Rs 3900 per barrel.

While there is "no immediate danger" to global oil supply from the Iran situation, it "nevertheless leads to an increase in geopolitical premium, which is probably forcing speculative shorts to cover at least part of their positions", said Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd.

"Oil and geopolitics are very interlinked", Fatih Birol, executive director of the International Energy Agency, told Reuters on Tuesday. Yet this doesn't rule out sustained production disruptions as Iraq has less downside risk, given its southern exports, than the KRG if flows to Ceyhan are interrupted and global oil prices rally, according to the bank. "Oil security remains a critical issue for all the countries".

There were also concerns about the stability of Iraq, the second biggest oil producer within the Organization of Petroleum Exporting Countries, behind Saudi Arabia.

Darling went on to predict that 2018 will see Brent at $47 "predicated on less compliance as we go into next year, also USA shale continuing growth.and also non-OPEC supply beating the market's expectations, like the former Soviet Union countries".

Birol said the rate of compliance by OPEC and its partners in their targeted cutting of about 1.8 million bpd between January this year and March 2018 was about 86 percent.

The 50-day moving average will be the trailing support line at $50.65.

Oil rises 1 per cent following Iraqi Kurdish conflict