Oil slips but holds most recent gains on expected Opec cuts

Crude oil prices slipped on Thursday but held on to most recent gains, supported by Organization of the Petroleum Exporting Countries (Opec) led supply cuts, tension in the West Asia and lower US production.

Brent crude was down 65 cents at $57.50 a barrel by 1010 GMT, still around 30 per cent above mid-year levels. US light crude was 70 cents lower at $51.34, almost 25 per cent higher than its lows in June.

Analysts said some investors were taking profits after two weeks of gains but upward momentum remained strong.

“The oil market is tightening gradually,” said Tamas Varga, analyst at London brokerage PVM Oil Associates.

“Opec is expected to roll over output restrictions for another nine months, supplies are at risk in the West Asia and US inventories are falling.”

The US Energy Information Administration said on Wednesday that US crude inventories fell by 5.7 million barrels in the week to October 13, to 456.49 million barrels. US output slumped by 11 per cent from the previous week to 8.4 million barrels per day (bpd), its lowest since June 2014 as production was shut in by a hurricane.

Instability in the West Asia has increased risks to supply from key oil-producing areas.

“The ‘ Fragile Five’ petrostates — Iran, Iraq, Libya, Nigeria and Venezuela — continue to see supply disruption potential, with northern Iraq crude exports at risk due to an escalation of tensions between the Kurdistan Regional Government, Baghdad and Turkey, while the United States has decertified the 2015 Iran nuclear deal,” US bank Citi said.

Iraqi Kurdistan's oil export more than halved to 225,000 bpd on Wednesday as the Iraqi military retook some of the biggest fields from Kurdistan’s Peshmerga forces.

“Geopolitical risk has returned to the oil market... As a result, we have raised our ICE Brent forecast for 4Q17 from $45 per barrel to $52,” Dutch bank ING said on Thursday.

US President Donald Trump last week refused to certify Iran’s compliance over a nuclear deal, leaving Congress 60 days to decide further action against Tehran.

During the previous round of sanctions against Iran, around one million bpd of oil was cut from markets.

Analysts say crude supply should keep tightening if Opec and partners, including Russia, extend as expected a deal to curb production through next year.

“Opec is desperate to bring the market into equilibrium,” said Shane Chanel at ASR Wealth Advisers.