Turkey threat to shut tap on Kurdish crude lifts oil price

Tuesday, 26 Sep, 2017

A gathering in Vienna last week between OPEC and its allies ended with no decision on an extension or deepening of the cuts beyond the first quarter of 2018, while the potential revival of US shale production is also weighing on the outlook for prices.

The price of OPEC basket also rocketed by 1.14 cents surging to a $52.82 per barrel.

US crude prices have lagged behind Brent's gains amid a large oversupply exacerbated by Hurricane Harvey, which forced the closure of almost 25 percent of USA refining capacity.

Naturally, the iPath S&P GSCI Crude Oil Total Return Index ETN (OIL) and United States Oil (USO) got a lift, climbing 4% and 3%, respectively.

The spread between Brent and WTI widened to $6.20 by the close of the latest trading session - a level not seen since the US lifted its ban on oil exports almost two years ago, analysts at JBC Energy said Monday.

The market was also under pressure ahead of weekly US oil inventory data that was expected to show a fourth straight week of crude builds.

OPEC and other oil exporters declined on Friday to extend their agreement to limit production in a bid to drain a global glut that has weighed on prices for three years.

Brent crude futures rose to 56.20 dollars a barrel by 12:19 p.m. EDT (1619 GMT), while U.S. West Texas Intermediate (WTI) crude futures gained 91 cents, or 1.8 per cent to 50.39 dollars. It rose 2.2 percent last week.

The spread between WTI and Brent futures widened to $6.61, its steepest since August 2015.

OPEC and non-OPEC producers meeting in Vienna last week said the market was well on its way towards rebalancing. "Changes are really related to Libya and Nigeria and the 100 percent compliance of everyone", Bijan Zanganeh, Iran 's oil minister, told journalists on Friday.

The Kurds, which make up about one-fifth of Iraq's 38 million people, have longstanding grievances against the government in Baghdad.

The market shift represents a short-term boost for North Sea oil producers after three years of low prices that have triggered steep cuts in employment in the industry's main centres around Aberdeen and forced many firms out of business.

The Russian minister said ministers would also discuss monitoring exports, although he said the main focus was still on production.

But recent comments from Iraq's oil minister suggest that there are other ideas at play - perhaps an extension through the end of 2018, or maybe even deeper production cuts.

Mohammed Barkindo, OPEC's secretary-general, said: "So for the foreseeable future, we can count on the Asia Pacific to be the primary outlet for OPEC and Middle Eastern export barrels", according to the FT. Ankara, which has been fighting with the Kurdish minority for decades, threatened to shut down the 500,000-bpd pipeline that carries Kurdish oil to the Turkish port city of Ceyhan.