LONDON: Oil prices rose on Thursday, spurred by tension around northern Iraq following the Kurdistan region’s vote in favour of independence in a referendum.
Brent crude was up 55 cents at $58.45 a barrel by 1330 GMT. It hit a more than two-year high of $59.49 on Tuesday after Monday’s referendum vote prompted Turkey to threaten to close the region’s oil pipeline.
U.S. light crude was up 45 cents at $52.59 after reaching a five-month intraday high of $52.86.
“Kurdistan and northern Iraq now export 500,000-550,000 barrels per day (bpd). That would be a big loss to the market,” said Tamas Varga, analyst at brokerage PVM Oil Associates.
Iraqi Kurdistan voted overwhelmingly in favour of independence, prompting Turkish President Tayyip Erdogan to say he could use force to prevent the formation of an independent Kurdish state and might close the oil “tap”.
Turkey promised on Thursday to deal only with the Iraqi government on crude, “restricting oil export” operations to Baghdad, the office of Iraqi Prime Minister Haider al-Abadi said.
Torbjorn Soltvedt, principal analyst for the Middle East at risk consultancy Verisk Maplecroft, said there was a roughly 20 percent chance that the pipeline linking northern Iraq and Ceyhan in Turkey would be shut.
“It’s not inconceivable that Turkey would sacrifice trade and oil flows for domestic political issues,” he told Reuters Global Oil Forum. “If things keep escalating after this then (oil) supply could become a real concern.”
U.S. crude also found some strength from a surprise fall in U.S. stocks. Domestic crude inventories dropped by 1.8 million barrels last week, the U.S. Energy Department said, versus forecasts for a build of 3.4 million barrels.
The outlook for oil demand has strengthened, analysts say.
The International Energy Agency this month raised its 2017 global oil demand growth estimate to 1.6 million bpd from 1.5 million bpd, citing strength in the United States and Europe.
Still, U.S. crude production rose to 9.55 million bpd last week, higher than before Hurricane Harvey hit the Gulf Coast.
With Brent futures commanding their highest premium over U.S. crude <WTCLc1-LCOc1> in more than two years, U.S. crude has become increasingly competitive in foreign markets and exports hit a record 1.5 million bpd last week.
That complicates efforts by the Organization of the Petroleum Exporting Countries and other major producers to push oil higher through output curbs, as every rise in price encourages more U.S. production.—Reuters