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Oil trades near 3-week high as Iraq-Kurd violence curbs exports

Tokyo - Oil traded near the highest close in three weeks as exports from northern Iraq fell by more than half after fighting between government troops and Kurdish forces.

Futures were little changed in New York after rising almost 3% the past four sessions. Flows by pipeline from Iraq to the Turkish port of Ceyhan were said to have fallen to about 240 000 barrels a day on Wednesday compared with their normal daily level of 600 000 barrels. In the US, crude inventories tumbled by 5.73 million barrels last week, according to government data.

Crude has held above $51 a barrel since tensions escalated late last week, and production in the disputed Kirkuk province has slumped at fields captured by the government from the Kurds.

Apart from the potential for disruptions in the second-biggest producer in the Organisation of Petroleum Exporting Countries, the oil market is also grappling with geopolitical risk from growing tensions between Iran and the US, Goldman Sachs said on Tuesday.

"Reduced exports from northern Iraq is currently lifting oil prices, while crude stockpiles in the US also dropped,” Kim Kwangrae, a commodities analyst at Samsung Futures, said by phone from Seoul. “However, I believe production will soon recover as keeping oil flowing from Kirkuk is important to both Iraq and Kurdish forces.”

West Texas Intermediate for November delivery, which expires on Friday, fell 2 cents to $52.02 a barrel on the New York Mercantile Exchange at 08:45. Prices rose 16c on Wednesday to close at $52.04, the highest since September 27. Total volume traded was about 43% below the 100-day average. The more-active December contract lost 3c to $52.23.

Brent for December settlement was at $58.18 a barrel on the London-based ICE Futures Europe exchange, up 3c. Prices added 27c to settle at $58.15 a barrel on Wednesday. The global benchmark crude was at a premium of $5.95 to WTI for December.

Oil-rich fields

The Kirkuk area’s Avana and Bai Hassan fields remained shut, with exports halted, as technicians sought to restore output, an official at the central government-run North Oil said on Wednesday.

The company won’t pump any more oil from the deposits than it needs to supply local needs until Iraq’s central government can reach an agreement with Kurdish authorities allowing exports from Kirkuk via a Kurd-controlled pipeline to Turkey, the official said.

Kirkuk, home to Iraq’s oldest-producing oil deposits, is a fault line in the power struggle between the central government in Baghdad and the Kurdistan Regional Government. Tensions in the northern province flared following a Kurdish referendum on independence from Iraq. The KRG included Kirkuk in the September 25 referendum despite competing claims to the ethnically mixed area.

In the US, crude stockpiles fell to 456.5 million barrels last week, according to the Energy Information Administration. Supplies at the key Cushing, Oklahoma, pipeline hub rose for an eighth straight week to the highest level since May, the EIA said.

Gasoline inventories expanded for a fourth week by 908 000 barrels, while distillate supplies gained for the first time since late August to 134.5 million barrels in the week ended October 13, according to the EIA. Refinery utilization slipped as plants including Exxon Mobil’s Joliet, Illinois, refinery are said to perform work.

Other oil-market news:

• Saudi Arabian Energy Minister Khalid Al-Falih plans to visit OPEC members Iraq and Algeria and non-OPEC producers Kazakhstan and Malaysia before OPEC’s next ministerial meeting on November 30, according to people with knowledge of the trip.

• The world’s biggest oil traders say crude could rise above $60 a barrel in a year as demand grows and OPEC keeps cutting. Or it might fall to $45 as another wave of US shale hits the market.

• China’s oil refining surged to a record 12.06 million barrels a day in September, according to Bloomberg calculations based on data Thursday from the National Bureau of Statistics.

• Crude output averaged 3.79 million barrels a day, which is up 0.5% from the previous month and narrows this year’s decline to 4.4%.

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