Brent crude surged to its highest in more than two years as Turkey threatened to shut down Kurdish oil shipments through its territory.
Futures climbed 3.8 percent in London, and the US benchmark rose to the highest since April. Turkey can choose to “close the valves” on oil exports from Kurdistan, Turkish President Recep Tayyip Erdogan said as the Iraqi region holds an independence referendum. Meanwhile, OPEC and its partners implemented more than 100 percent of their agreed cuts last month, and the outlook for global demand has improved.
“It’s pretty clear the Kurds are going to vote for independence and we will have yet another geopolitical hot spot in the Middle East that threatens a significant amount of oil supply,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone.
At the same time, “the cooperation and the strong effort by OPEC is registering with the market.”
Crude prices have risen more than 10 percent this month in New York as US refiners recovered from Hurricane Harvey and both OPEC and the International Energy Agency sweetened their worldwide demand forecasts. Concerns over excessive supplies from the US are also easing. American explorers reduced the number of rigs searching for crude last week to the lowest level since June.
“The implication here is that with drilling activity in the United States moderating, it’s going to be very likely that we will not get the robust increases that many had expected from US shale,” Bart Melek, head of global commodity strategy at TD Securities in Toronto, said by telephone. “Certainly, this whole idea that OPEC is communicating that we are rebalancing quicker than expected” has helped underpin the rally, he said.
Brent for November settlement advanced $2.16 to close at $59.02 a barrel on the London-based ICE Futures Europe exchange, the highest level since July 2015. Total volume traded Monday was about 16 percent above the 100-day average.
The global benchmark’s 50-day moving average crossed above its 200-day moving average for the first time since 2016. The pattern, known as a golden cross, is typically a bullish indicator and may encourage buying.
West Texas Intermediate for November delivery added $1.56 to settle at $52.22 a barrel on the New York Mercantile Exchange. Brent traded at a premium of $6.80 to WTI.
Gasoline and diesel prices also rose, as rough Atlantic seas are said to hamper crude deliveries to at least two East Coast refineries. Gasoline on the Nymex rose 3.2 percent to $1.722 a gallon, while diesel futures climbed 2.2 percent to $1.8563.
"There’s a fear that East Coast inventories are going to go down because the storms are interfering with deliveries," said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.
"People think we’re going to see yet another very bullish report on the product inventories as they’re drawn out of storage and not replenished."
The outlook for the global oil market is improving and members of the Organization of Petroleum Exporting Countries will keep pressing onward until it balances, OPEC Secretary-General Mohammad Barkindo said in a video message at a conference in Singapore on Monday.
However, it’s not possible to say whether the deal will need to be extended until closer to its March expiration, Kuwait’s Oil Minister Issam Almarzooq said.
The Kurdistan Regional Government’s crude oil exports through Turkey’s Mediterranean port of Ceyhan would end if Turkey chose to shut them down, Erdogan said in Istanbul. The Iraq parliament voted to close its border crossings with Kurdistan, return oil fields in north of Kirkuk and other disputed areas to the control and supervision of the federal government, the legislature said on its website.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.