Crude oil prices continued their ascent today as lower exports from Iraq amid the internal conflict with the Kurds gave oil bulls a cause for optimism. Brent crude was trading above US$57 a barrel and WTI was close to US$52 in morning Asian trade today. At 6:49 EDT, WTI was at US$52.26 a barrel.
Crude oil exports from Iraq have fallen by more than 200,000 bpd since the start of the month, and it’s unclear how long this lower export rate will continue. At the same time, drilling rig numbers in the United States are falling, too: Baker Hughes reported declines in the rig count for 10 of the last 12 weeks. The declines follow a string of capex cuts for the year, Reuters notes.
Meanwhile, columnist John Kemp noted that hedge funds and other money managers continue to hold substantial long positions on crude, equivalent to 883 million barrels in the five biggest futures and options contracts as of October 17, as they wait for the higher demand growth that was forecast recently by several authorities.
OPEC’s recent announcement about a record-high compliance rate of 120 percent among all participants in the oil production cut agreement served to solidify speculator’s optimism. The cartel added that “all options are on the table” with regard to extending the agreement to the end of 2018. Related: Syrian Kurds Cut Secret Gas Deal With Russian Forces
One analyst, Tomomichi Akuta, from Mitsubishi UFJ Research and Consulting, said that “The market is currently weighing supportive materials more, such as the Kurdistan situation, the slowdown in shale-related (U.S.) rig counts and the possible extension in OPEC (output) cuts.”
Vandana Hari from Vanda Insights, on the other hand, said that the market is already pricing the risk of 320,000 bpd from fields around Kirkuk getting stranded after the Iraqi forces took over the oil city. She added that most of Iraq’s oil comes from the southern fields, so there will be no severe disruption in global supply as a result of the conflict in Kurdistan.
After all, Hari, says, there is more than 1.7 million bpd in unused oil production capacity among the participants in the OPEC cut deal, so a disruption in Iraqi supply can easily be plugged.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com:
- The 5 Countries That Could Push Oil Prices Up
- How Blockchain Is Transforming The Energy Industry
- Norway Unfazed By Peak Oil Concerns