Oil prices moved higher after Iraq-Kurdistan tensions amplified. The Iraqi government forces and Kurdish peshmerga escalated near the city of Kirkuk, OPEC’s second largest producer.
Brent oil climbed to $58 per barrel, just $2 away from OPEC’s target mark. The expectation is that Brent oil will average at $54 this quarter. Meanwhile, crude oil is 1.4% higher at $52. 42 per barrel.
After last month’s independence referendum, where Kurdistan voted overwhelming in favour of independence from Iraq, tensions have been bubbling between the two regions.
Iraqi forces have moved into the oil-rich region of Kirkuk. The political rift could cause disruptions to production, which has casued the price of oil to increase.
Since June, oil prices have increased by more than 25%, as OPEC and its allies manage to decrease supply, while demand for the commodity has been surprisingly robust.
Political tensions in the Middle East as well as the Trump administration’s reaction to Iran’s nuclear programme.
However, as prices move up, it intices US shale producers to increase output as profit margins grow.
OPEC have reduced prodction by over half-a-million barrels per day.
Saudi Arabia have cut the most, reducing production by 519,000 barrels per day. United Arab Emerites have reduced output by 178,000 barrels per day and Kuwait has cut 172 barrels per day.
Libya and Nigeria are expemt from production cuts after the African countries struggled to rebuild productuion amid hightened internal strife.
It is belived that demand for oil will rise in 2018. Additionally, demand is predicted to remain strong, therefore prices could go higher.
Chinese demand has helped to reduced the stockpiles as China has restored its Strategic Petroleum Reserve of emergency supplies. The nation’s imports are up 11% from last year.
OPEC will meet in November to discuss extending the cartel’s production cuts beyond March 2018.