Oil prices test three-week highs

Ann Santiago
October 19, 2017

E&P reports in its article Oil Prices Build As Iraq, US-Iran Tension Raises Risks that after months of rangebound trading, during which OPEC-led supply cuts supported crude but rising USA output capped markets, prices have made significant gains this month.

US crude rose 0.82 percent to $51.87 per barrel and Brent was last at $57.86, up 1.21 percent on the day.

Brent prices had already reached a yearly peak of $59.49 on September 26, the day after a referendum was held on the independence of Iraqi Kurdistan.

Major producers including OPEC members had a year ago 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. "Geopolitics and specifically geopolitical tensions have returned to the fore after being fanned by unrest in Iraq and rising hostility between the USA and Iran", Stephen Brennock, an analyst at brokerage PVM Oil Associates Ltd, wrote in a note Wednesday.

Oil prices traded higher Wednesday, supported by ongoing political tensions in the Middle East.

The U.S. bank said that its “revised global oil supply and demand forecasts point to a sizeable deficit in 2017 of 230 thousand bpd”.

An escalating crisis between the Iraqi government and Kurdish separatists is threatening the supply of oil and could push up prices, analysts warned on Tuesday.

Asked about the conflict in Iraq between the government and separatist Kurds and the USA decision to decertify its nuclear deal with Iran, Birol said it is premature to assess the impact of these geopolitical risks on oil markets. President Donald Trump last week refused to certify Iran's compliance with a 2015 global agreement to curb the Islamic Republic's nuclear program in exchange for economic sanctions relief. A week before, exports were 2.0 MMbbls per day.

In an otherwise typically quiet Monday market, the price of Crude Oil is up nearly 1.7% since this week's open, as at the time of writing.

Among refined products, Nymex reformulated gasoline blendstock-the benchmark gasoline contract-was up 0.82%, at $1.63 a gallon. It last stood at $7,110.5. "Oil and geopolitics are very much interlinked", Fatih Birol, executive director of the International Energy Agency, told Reuters.

More than one month ahead of OPEC's next official meeting, sources told Reuters its members were leaning toward extending an oil supply cut deal struck with Russian Federation and other producers for a further nine months.

"We see Brent averaging $54 this quarter and $52.50 per barrel in 1H18, compared with our previous forecasts of $50 and $49.50 per barrel respectively".

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