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Crude Prices Rebound

Crude Prices ReboundCrude Prices Rebound

Oil futures rebounded strongly on Tuesday following an overnight slide amid reports of fighting between militias aligned with the Iraq central government and Kurdish forces in the nation's northern crude-producing region.

Oil prices had earlier slipped as crude flows through Iraq's northern pipeline to Ceyhan in Turkey rose further, offsetting an expected fall in US crude inventories, CNBC reported.

Brent crude, the global benchmark, was down 6 cents at $57.43 a barrel. It fell as low as $57.04 earlier in the session. US crude for December delivery was up 34 cents at $52.24, having touched a session low of $51.55.

Iraqi pro-government paramilitaries launched an offensive against Kurdish troops on Tuesday near the Turkish frontier, pushing toward a strategic border crossing and oil export pipeline hub that Baghdad says must come under its control.

The development, along with comments from Saudi officials at the Future Investment Summit in Riyadh, underpinned the rebound, John Kilduff, founding partner at energy hedge fund Again Capital, told CNBC.

Pumping along the pipeline rose to 300,000 barrels per day on Tuesday, a shipping source said, adding to a gain on Monday. Output fell from 600,000 bpd last week when Iraqi forces retook control of oilfields.

"The increase is minimal and is way below the normal 600,000 bpd. Nevertheless, the market took it as a positive development as far as oil supply is concerned," said Tamas Varga of oil broker PVM, referring to the gain in flows on Monday.

The disruption to exports from Iraq, the second-largest producer in OPEC, has helped support the market, adding to the supply cut being carried out by OPEC and allied producers since January to get rid of excess supply.

Shipments from the north and south of Iraq in October have fallen more than 200,000 bpd, according to export data and an industry source, although Iraq is hoping to boost southern exports to compensate for the northern drop.

That should give OPEC's already high compliance with the cutback agreement a boost. In September, the OPEC and non-OPEC countries participating in the supply cut met 120% of their commitments, OPEC said.

OPEC and its allies are hoping to drain excess supply that is keeping prices at half their level of mid-2014.

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