Oil extends 2-year high amid OPEC resolve, Iraq disruptions

Bloomberg

Oil extended a two-year high above $60 a barrel in London amid growing signs that OPEC and Russia will press on with supply curbs, and as pipeline flows from Iraq were disrupted.
Brent crude futures added 0.3 percent. Saudi Arabian Crown Prince Mohammed bin Salman last week backed extending production cuts by the Organization of Petroleum Exporting Countries and its allies beyond March, following a similar endorsement by Russian President Vladimir Putin earlier this month. Iraq’s exports through its northern pipeline to Turkey have halted, according to a port agent.
“High OPEC compliance” and “roaring oil demand growth combined over the last few months have accelerated the rebalancing of the oil market,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “Reports that Saudi Arabia and Russia are mulling over the prospect of an extension” have “played a part in buoying market sentiment and recently lifting oil prices.”
Both Brent, the benchmark for more than half the world’s oil, and US marker West Texas Intermediate crude have jumped in October amid speculation that OPEC and partners including Russia will prolong output cuts aimed at reducing a global glut. World stockpiles are down to about 160 million barrels above the five-year average and prices are heading toward “fair” levels, according to Qatar Energy
Minister Mohammed Al Sada.
Brent for December settlement, which expires on Tuesday, rose as much as 45 cents to $60.89 a barrel on the London-based ICE Futures Europe exchange, the highest since July 2015. It was at $60.61 at 9:42 a.m. in London. Prices gained 4.7 percent last week. The global benchmark crude traded at a
premium of $6.78 to WTI.
WTI for December delivery was at $53.85 a barrel on the New York Mercantile Exchange, down 5 cents. Total volume traded was about 36 percent below the 100-day average. Prices advanced 2.4 percent to $53.90, capping a 4.7 percent weekly gain. Oil flows were disrupted from the north of OPEC member Iraq, as bad weather shut the Turkish port of Ceyhan from which some of the country’s
exports are shipped.
Pipeline flows from the Kurdish region to Turkey halted at 4 a.m. local time, stopping the movement of about 264,000 barrels a day, according to a port agent. The delivery of crude from fields in Kirkuk, recently reclaimed by the central government, was also suspended after a brief resumption last week.
No reason was given. Just before the weekend, the region’s Kurdish administration agreed
a truce with the central Baghdad-based government following
the Kurds’ earlier vote to secede from the country.
Iraq added a fifth offshore crude-exporting facility with a capacity of 900,000 barrels a day to boost shipments by sea, the nation’s oil ministry said in an emailed statement, citing Minister Jabbar al-Luaibi. The financiers and corporate chieftains gathered for Saudi Arabia’s ‘Davos in the Desert’ heard the same message again and again.
From the crown prince down, Saudi leaders wanted no room for doubt: the initial public offering of oil giant Aramco is “on track” for 2018. Among US explorers, the new emphasis is on getting the most output possible with wells that now can run horizontally for miles, as well as putting into service drilled-but-uncompleted wells that need to be fracked.
Drillers added one rig last week, according to data. American crude production climbed by 1.1 million barrels a day in the week ended Oct. 20. Hedge funds boosted their Brent net-long positions — the difference between bets on a price increase and wagers on a drop — by 2.6 percent to 506,737 contracts in the week ended October 24, according to data from ICE Futures Europe. That’s close to a record at the end of September and the previous high in February.