And it’s all because energy giants say the global market is on its way towards rebalancing — oh, and a problem in the Middle East
NEW YORK — Oil prices hit a more than two-year high on Monday after major producers said the global market was on its way towards rebalancing, while Turkey threatened to cut oil flows from Iraq’s Kurdistan region toward its ports.
The November Brent crude futures contract was up US$1.51, or 2.5 per cent, at US$58.37 a barrel by 11:33 a.m. EDT, its highest since July, 2015.
U.S. West Texas Intermediate crude for November delivery rose US$1.02, or 2 per cent, to US$51.68 a barrel, close to highs last seen in May.
“It’s all driven by the idea is that the production cut is starting to work and the rebalance is underway,” said Gene McGillian, director of market research at Tradition Energy in New York.
Even as both contracts rallied, concerns about U.S. production growth weighed on WTI, widening the spread between the two, he said.
The discount of the WTI to Brent futures widened to US$6.61, the widest since August 2015.
Turkey has said it could cut off a pipeline that carries oil from northern Iraq to the global market, putting more pressure on the Kurdish autonomous region over its independence referendum.
The Iraqi government does not recognize the referendum and has called on foreign countries to stop importing Kurdish crude oil.
“If this boycott call proves successful, a good 500,000 fewer barrels of crude oil per day would reach the market,” Commerzbank said in a note.
The Organization of the Petroleum Exporting Countries, Russia and several other producers have cut production by about 1.8 million barrels per day (bpd) since the start of 2017, helping to lift oil prices by about 15 per cent in the past three months.
Kuwaiti Oil Minister Essam al-Marzouq, who chaired Friday’s meeting in Vienna of the Joint Ministerial Monitoring Committee, said output curbs were helping to cut global crude inventories to their five-year average, OPEC’s stated target.
Russia’s energy minister said no decision on extending output curbs beyond the end of March was expected before January, although other ministers suggested such a decision could be taken before the end of this year.
Iran expects to maintain overall crude and condensate exports at around 2.6 million bpd for the rest of 2017, a senior official from the country’s state oil company said.
The energy minister from the United Arab Emirates said the country’s compliance with OPEC’s supply cuts was 100 per cent.
Nigeria is pumping below its agreed output cap, its oil minister said.