Published: Thu, October 19, 2017
Markets | By Lucia Cruz

Oil steady as USA output gains offset Middle East tensions

Oil steady as USA output gains offset Middle East tensions

Wall Street closed at record highs, the dollar edged up and copper touched a three-year peak on Monday as upbeat Chinese data drove optimism about the world's second-biggest economy, while oil prices jumped due to supply worries after Iraqi forces seized the oil-rich city of Kirkuk from Kurdish fighters.

Global benchmark Brent crude futures, the benchmark for oil prices outside the US, eased 0.47% to $56.67 a barrel. If prices remain high the outlook may be positive for breakbulk operators serving the oil sector as the higher price point supports renewed investment in offshore development.

"In the case of Kurdistan, the 500,000 barrel-per-day (bpd) Kirkuk oil field cluster is at risk with initial reports that 350,000 bpd has shut in, although this remains unclear", Goldman analysts said.

Civilian workers at both fields were reportedly sent home following a build-up of Iraqi military forces around the sites.

"If there are (new sanctions), we expect that several hundred thousand barrels of Iranian exports would be immediately at risk", Goldman said.

"In the case of Iran, there are likely no immediate impacts on oil flows and there remains high uncertainty on potential reintroduction of United States secondary sanctions". U.S. President Donald Trump last week refused to certify Iran's compliance over a nuclear deal, leaving Congress 60 days to decide on further action against Tehran.

Global supply and demand for crude oil will be largely balanced next year, as growth in consumption helps and an output curb works its way through stocks, the IEA said in its monthly report.

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Analysts forecast USA crude inventories declined by about 4.2 million barrels in the week to October 13.

Various analysts are also revising the oil price predictions as the global crude market continues to tighten.

As expected, crude oil prices filled the gap higher yesterday at $52.37, and prices reached the resistance area as mentioned earlier that this would be a crucial place.

If no other countries support the USA push for more sanctions, Iran's production is unlikely to drop by 1 million bpd, according to Goldman.

US inventories fell by 7.13 MMbbl last week, the American Petroleum Institute was said to report. Both contracts traded up almost 1 percent and down over 1 percent during the day. "Collectively, OPEC countries lost more than $1 trillion".

“We see Brent averaging $54 this quarter and $52.50 per barrel in 1H18, compared with our previous forecasts of $50 and $49.50 per barrel, respectively, ” Bank of America Merrill Lynch said.

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