Seoul - Crude extended gains from the highest close in two weeks as speculation mounted over potential output disruptions in a region that’s home to Iraq’s oldest producing oil fields.
Futures in London rose as much as 1.3% after gaining 2.8% last week. Iraqi soldiers moved late Sunday to take over fields in the northern city of Kirkuk from Kurdish forces.
That’s amid an intensifying conflict after the semi-autonomous Kurdistan Regional Government, or KRG, held a referendum on independence from Iraq on September 25. The Organisation of Petroleum Exporting Countries (Opec) sees crude demand growing at a "healthy pace" over the next five years.
Brent oil has risen in six of the past seven weeks on signs output curbs by Opec and its allies are draining a glut. While exports of about 600 000 barrels a day from Kirkuk’s oil fields and deposits inside the adjacent Kurdish region were said to continue on Sunday, Eurasia Group estimates Iraq taking control could cut shipments by 450 000 barrels daily until the government repairs a pipeline to Turkey or reaches a revenue-sharing deal with the Kurds.
"Tensions are definitely escalating in Iraq at the moment, and it will be a supporting factor for oil prices for the time being," said Kim Kwangrae, a Seoul-based commodities analyst at Samsung Futures.
"It’s a complex issue as it involves Kirkuk oil fields that produce about 550 000 barrels a day as well as the neighbouring countries such as Turkey, which is threatening to cut off the pipeline."
Brent for December settlement climbed as much as 73 cents to $57.90 a barrel on the London-based ICE Futures Europe exchange, and traded at $57.78 at 12:52pm in Singapore. Prices added 1.6% to $57.17 on Friday.
The global benchmark crude traded at a premium of $5.66 to December West Texas Intermediate.
WTI for November delivery rose as much as 54 cents to $51.99 a barrel on the New York Mercantile Exchange. The grade advanced 1.7% to $51.45 on Friday. Total volume traded was about 14% above the 100-day average.
Iraq is the second-largest producer in Opec, pumping most of its 4.47 million barrels a day from fields in the south and shipping it from the Persian Gulf port of Basrah.
The Kurdish region, meanwhile, relies on a pipeline to the port of Ceyhan in neighbouring Turkey to get most of its crude to market.
The conduit also transports some 100 000 barrels a day of oil from federal-run fields in Kirkuk.
The shipments from Kirkuk combine crude pumped by Iraq’s state-owned North Oil and by the KRG, and both flows are normal, Kirkuk Governor Najmaddin Kareem said on Sunday.
The Kurdistan Security Council confirmed in a Twitter message late Sunday that Iraqi forces and Shiite militias have advanced from southern Kirkuk, intending to take over a military base near the oil fields.
Other oil-market news:
Crude demand will climb an average 1.2 million barrels a day through 2022 and slow to 300 000 barrels a day in 2035 to 2040, Opec Secretary General Mohammad Barkindo said Sunday in Kuwait.
Cautious money managers cut bets on rising WTI crude in the week ended Tuesday, US Commodity Futures Trading Commission data showed.
SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.