ERBIL, Kurdistan Region – Oil prices continued to rise on Monday due to supply concerns amid conflicts between Iraq and the Kurdistan Region, a decline in US market production due to the impacts of recent hurricanes and increasing oil demands from Asia.
Brent Crude had increased to $57.87 barrels per day (bpd), up by 12 cents from the last close and US West Texas Intermediate (WTI) crude had increased to $52.04 bpd, up 20 cents.
“Oil prices are holding comfortably above $50 as possible supply disruptions in the Kurdish region of Iraq support prices,” William O‘Loughlin said, analyst at Rivkin Securities as reported by Reuters on Monday.
“U.S. production was also recently impacted by a hurricane for the second time in many months and the number of U.S. drilling rigs declined for the third week in a row,” O‘Loughlin added.
Oil flow has reduced in Iraq due to clashes which have occurred this week between the Iraqi central government and the Kurdistan Regional Government (KRG) over Kirkuk and other disputed areas in the region.
Additionally, as part of a pact with the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC producers to tighten the market, production is still being withheld in Iraq.
However, demand for crude oil is steadily increasing in Asia, mainly in China and India.
China has demanded an average of 8.5 million bpd between January and September.
“Three main factors are driving China’s insatiable appetite for crude: declining domestic production, increased access to imports and exports for independent refiners, and building up the strategic petroleum reserve,” Britain’s Barclays bank said.
India’s fuel requirement increased due to ongoing maintenance on several oil refineries with the country importing a record 4.83 million bpd in September.
As the oil market remains unstable, analysts are expecting crude oil prices to further increase.
“We will see oil prices higher by 10 percent by the end of the year,” said Shane Chanel, an advisor at ASR Wealth Advisers. “We have started to accumulate strong positions within the oil sector.”
The Kurdistan Region, since 2013 has been exporting oil to world markets through a pipeline that terminates at the Mediterranean port of Ceyhan in Turkey. Ankara, which has rejected Kurdistan’s independence referendum, has threatened that it could close down the pipeline.
The oil-rich province of Kirkuk and other disputed or Kurdistani areas claimed by both Baghdad and Erbil came under the control of the federal government this week.
Iraqi forces have taken control of the majority of disputed areas, including several oil wells claimed by both Erbil and Baghdad that had largely been brought under Peshmerga control since the war against ISIS began in 2014.
Prior to the federal government’s takeover, the Kurdistan region was producing around 650,000 bpd.
This week’s conflict between the Kurdish and Iraqi forces in the disputed areas came after months of sour relations between the two governments as the KRG prepared for and held a referendum on independence, including the disputed areas in the vote.
The people of the Kurdistan Region and the disputed areas voted for independence on September 25 with 92.7 choosing to leave Iraq.
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