Brent crude oil price tops $60 for first time in two years

Signs for optimism as Saudi crown prince backs the extension of Opec production cuts beyond March, writes Jessica Summers

BRENT crude surged above $60 a barrel for the first time in more than two years amid enthusiasm that Opec may extend its supply-restraint deal and indications that the situation between Iraq and the Kurds remains fragile.

Futures were poised for their biggest weekly rally since July in London, and crude in New York increased to a seven-month high. Saudi Arabian Crown Prince Mohammed bin Salman this week backed the extension of production cuts by Opec beyond March, fueling optimism. At the same time, crude flows from Iraq to Ceyhan, Turkey, remain below normal levels and a US spokesman said the Kurds and Iraqis haven’t reached an official ceasefire.

“The Saudis keep pressing for an extension of the output-cut deal through next year, so the market is feeding off that and we are seeing signs of tightening,” John Kilduff, a partner at Again Capital, a New York-based hedge fund, said.

“The Iraq-Kurd situation is also getting the attention of the market. The volumes are down out of Ceyhan.

This is not resolving itself as quickly as it looked like it might have been.”

On Friday, Brent for December settlement jumped 94 cents to $60.24 a barrel on the London-based ICE Futures Europe exchange after touching $60.53, the highest intraday level since July 2015. The global benchmark traded at a premium of $6.51 to West Texas Intermediate (WTI).

Both the global benchmark and its US counterpart have rallied in October amid increasing belief that Opec will agree to cut output later into next year, helping to work down global inventories.

Statoil chief executive Eldar Saetre said in a Bloomberg Television interview that he continues to see strong demand and the oil market is “definitely balancing”.

“People are starting to price in the OECD inventories moving back towards normalized levels into later 2018,” said Brad Hunnewell, senior equity analyst at Rockefeller & Co.

US Army Colonel Ryan Dillon — a spokesman for Operation Inherent Resolve, the US-led coalition against the Islamic State said in a Twitter message last Friday — that he “incorrectly” said in an interview with Kurdish Rudaw news agency that there was a cease-fire between Iraqi and Kurdish forces. A rally in WTI immediately followed his message. Iraqi Prime Minister Haider Al-Abadi suspended operations by federal forces for 24 hours in disputed areas to allow a joint Iraqi and Kurdish team to deploy forces, Sumaria TV reported.

As earnings season kicked off, Exxon Mobil and Chevron reported lower production compared with third-quarter estimates. Total posted the highest earnings from pumping oil and gas in more than two years, and its chief executive Patrick Pouyanne said the imbalance between crude supply and demand is finally dissipating.

“You’ve had a couple of the major international oil companies reporting production results that have been perhaps modestly below street expectations,” Hunnewell said. That’s also lending support to oil’s rally, he said.

The Standard & Poor’s 500 Energy Index was up the most in almost two weeks on Friday, with Cabot Oil & Gas, Hess and Noble Energy leading the pack.