Oil gains on concern Iraq-Kurd tensions will disrupt crude flows

Bloomberg

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 1.7% after adding 2.8% last week. Iraqi soldiers seized facilities including a refinery after mobilizing to take fields near the northern city of Kirkuk from Kurdish forces. Their advance comes amid clashes following an independence referendum by the semi-autonomous Kurdistan Regional Government, or KRG, on September 25.
Exports of about 600,000 barrels a day from Kirkuk’s fields and others in the adjacent Kurdish region were said to continue. Yet around 120,000 barrels a day pumped by the KRG from fields claimed by Baghdad are at immediate risk, while any move by neighboring Turkey to close a Kurdish pipeline would create bigger disruption, according to Bloomberg oil strategist Julian Lee.
“The Kurdistan tension is the main argument for the price gain,” said Bjarne Schieldrop, chief commodities analyst at SEB AB in Oslo. “The fact that the market now has started to react to geopolitical risks like this is clearly a reflection of an oil market with less abundance of oil.”
Brent for December settlement rose much as 96 cents to $58.13 a barrel on the London-based ICE Futures Europe exchange, and traded at $57.92 as of 10:40 a.m. local time. Prices climbed 92 cents to $57.17 on Friday. The global benchmark traded at a premium of $5.53 to West Texas Intermediate for the same month. WTI for November delivery advanced as much as 79 cents, or 1.5 percent, to $52.24 a barrel on the New York Mercantile Exchange, after gaining 1.7 percent on Friday. Total volume traded was about 10 percent above the 100-day average.
Iraq is the second-largest producer in the Organization of Petroleum Exporting Countries, and pumps most of its 4.47 million barrels a day from fields in the south, shipping it from the Persian Gulf port of Basrah. The country’s Kurdish region, meanwhile, relies on a pipeline to the Turkish port of Ceyhan to get most of its crude to market.