Published: Wed, September 27, 2017
Global Media | By Abel Hampton

Turkey threat to shut tap on Kurdish crude lifts oil price

Janet Kong, Eastern Hemisphere chief executive officer of integrated supply and trading at BP, said while rebalancing is underway, OPEC needs "definitely to cut beyond the first quarter" to bring inventories down and back to historically normal levels and to offset persistent overproduction from renegade members such as Libya and Iran.

If Asian refiners seeking light crudes can buy at prices linked to WTI, that may be far more attractive than looking at crudes priced against Brent.

West Texas Intermediate (WTI) rose 3.1% to $52.2 a barrel, its highest level since April, and 0.11% to $52.3 a barrel in early morning trading. If the gains stay, it will be oil's best quarter since 2004.

"The uptrend in oil prices it taking another leg higher after the Opec meeting on Friday reported high compliance with output cuts and implied an extension of the cuts beyond March", said Jasper Lawler, head of research at London Capital Group. The Russian energy minister said OPEC did not agree on a freeze beyond March 2018, making it a key date for the oil industry.

However, some market analysts addressed their concern about growing oil output from the US.

Kachikwu stated at the OPEC and non-OPEC meeting that even though Nigeria's oil production in August was 1.802 million barrels per day (mbpd), it was still not an enough justification for such call.

Phil Flynn, a senior market analyst for the PRICE Futures Group in Chicago, said in an emailed market report the bullish sentiment that followed the storms won't last for long.

Healthy global demand according to the IEA has played its part, and the prompt futures backwardation in Brent has finally seen it break long-term resistance. Earlier this year, Brent was in a "contango" situation, where nearby contracts traded at a discount to those farther out. On Friday it said the reduction had helped to lift oil prices by about 15% in the past three months.

Meanwhile Turkey threatened to cut oil flows from Iraq's Kurdistan region in response to its referendum on independence, which Turkey does not recognise.

Its Managing Director, Mr. Yusuf Matashi, who set this targets in Benin, said the planned increase in production was due to ongoing transformation in the firm.

Between 2014 and 2016, global oil companies reduced spending by a whopping 40%, efforts that included significant layoffs and withdrawals from projects seen as too expensive or unlikely to bear near-term profits. The EIA revised lower USA oil production for 2017 from 9.35 million barrels per day to 9.25 million barrels per day a 100k barrel a day decrease.

A geopolitical risk premium from escalating tensions between the United States and North Korea was added midway through the session after Pyongyang said it viewed some of the messages from U.S. President Donald Trump's account on Twitter as a declaration of war.

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