Oil prices surged from October 13 through October 18 as fighting between Iraqi and Kurdish forces intensified, threatening supplies from northern Iraq, while markets await changes from US Congress on sanctions targeting Iran demanded by US President Donald Trump to stave off a US withdrawal from the deal.
But oil prices fell for a second consecutive day on October 20, as traders considered the potential impact of ongoing geopolitical risks on global oil supply.
Brent crude fell nearly 1%, to $56.67 a barrel on London’s Intercontinental Exchange, according to the WSJ. On the New York Mercantile Exchange, WTI was trading down 1.15% at $50.70 a barrel.
Crude prices climbed earlier this week after clashes between Iraqi government troops and forces from the semi-autonomous Kurdish region disrupted some oil production and exports. Kurds voted nearly unanimously to break away from Iraq in a controversial independence referendum late September.
Meanwhile, despite the tensions in the oil-rich Kurdish region, Russian state-owned oil giant Rosneft said on October 19 it has signed an agreement with the Kurdistan Regional Government. “Rosneft and Kurdistan Regional Government are continuing to build on agreements they have reached previously,” the Russian company said in a press release.
On the sidelines of the X Eurasian Economic Forum in Verona the parties have announced the start of joint implementation of an infrastructure project for the operation of the oil pipeline in the Kurdish Autonomous Region, Rosneft said.
Rosneft’s share in the project may amount to 60%. The other project participant with 40% share will be KAR Group, who is the current pipeline operator.
With Rosneft acquiring 60% in the project, the Russian oil company will become a controlling stakeholder in Kurdish oil infrastructure.
“The entry into the infrastructure project will contribute to achievement of Rosneft’s strategic objectives and will enable Rosneft to enhance the efficiency of oil transportation to the end customers including supplies to the Company’s refineries in Germany,” Rosneft CEO Igor Sechin was quoted as saying in the press release.
Violence has curbed output in Iraq, which is the second-biggest producer of the Organization of Petroleum Exporting Countries (OPEC).
Oil supplies that flow from Kurdistan, in northern Iraq, through Turkey fell to around 196,000 barrels a day on October 19, compared with a usual supply of around 600,000 barrels a day, according to Dutch bank ING Group, cited by the WSJ. Iraq has sought to restore flows from fields in the disputed region.
OPEC Secretary General Mohammed Barkindo said on October 19 that the agreement reached between OPEC and non-OPEC members late last year to cap their production at around 1.8 million barrels a day helped rebalance the crude oil market.
“There is no doubt that this market is rebalancing at an accelerating pace,” he said in a speech at the Oil & Money conference in London. “Stability is steadily returning and there is far more light at the end of the dark tunnel we have been traveling down for the past three years,” he added.
The OPEC, non-OPEC agreement was extended in May through March 2018. Reuters reported on October 18, citing OPEC sources, that producers are leaning towards extending the deal for a further nine months, though the decision could be postponed until early next year depending on the market. The oil cartel is set to officially debate a prolongation of the deal at OPEC’s next meeting in Vienna in November.
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