Bullish oil streak propels Brent to strongest Q3
AMSTERDAM: Oil edged higher on Friday as tensions around Iraqi Kurdistan threatened the region’s crude supplies, helping Brent prices to their strongest third-quarter performance since 2004.
Global benchmark Brent crude LCOC1 was up 1 cent at $57.42 a barrel at 1122 GMT, notching up a third quarter gain of around 20 per cent.
The contract had reached its highest in more than two years earlier in the week, resulting in a fifth consecutive weekly gain. This performance is Brent’s longest weekly bull run since June 2016.
US crude CLC1 traded flat at $51.56 a barrel, on track for its strongest third quarter in 10 years and its longest streak of weekly gains since January.
“Oil prices remain firm with the backdrop of tensions between Iraq/ Turkey/iran and Kurdistan still threatening to halt up to 600,000 barrels per day of production from the semi-autonomous region,” said Jamie Campbell, head of natural resources at Panmure Gordon.
Iraq’s Kurds endorsed secession by nine to one in a referendum on Monday that has angered Turkey, the central government in Baghdad, and other powers, who fear the vote could lead to renewed conflict in the oil-rich region.
Turkish President Tayyip Erdogan called the vote illegitimate and has threatened to break with past practice and deal only with the Baghdad government over oil exports from Iraq.
“No rapid solution to the crisis can be expected, which should continue to lend support to the oil price,” analysts at Commerzbank wrote.
Most oil that flows through a pipeline from Iraq to Turkey comes from Kurdish sources and a cut-off would severely damage the Kurdish Regional Government, which relies on sales of crude for almost all its hard currency revenues.
So far, oil flows through the pipeline have been normal.
Oil price gains have also been supported this month by anticipated renewed demand from US refiners that were resuming operations after shutdowns due to Hurricane Harvey.
Even more bullish views have already started to appear in the oil options market that has seen a spike in activity at $100 a barrel, indicating some oil bulls are betting the price could trade around that level by this time next year.
However, Middle Eastern oil producers are concerned the recent price rise will incentivise more U.S. shale production and push prices lower again.