Brent crude is holding above a more than two-year high of $59 a barrel, lifted by fast-growing demand and a threat to Iraqi Kurdistan’s crude exports as the autonomous region holds a referendum on independence. The international oil benchmark was at $59.04 a barrel in early London trading on Tuesday after a steep rise on Monday propelled it to its highest point since July 2015.
Brent has gained more than 30 per cent since June as global stockpiles have tightened, with demand in industrialised countries expanding alongside emerging markets for the first time in almost a decade.
BP’s top oil trader in Asia said the crude market had turned a corner after a three-year slump, with consumption boosted by lower prices and excess inventories finally declining thanks to Opec’s efforts to cut production. “The market is in rebalancing mode,” said Janet Kong, speaking at the FT Commodities Asia Summit in Singapore on Monday. “We are at a juncture where we are going to see continued inventory draws.”
The oil price received a further injection of momentum on Monday after Recep Tayyip Erdogan, Turkey’s president, warned Iraqi Kurdistan that he opposed its independence referendum as its residents voted, saying Ankara could shut off its main export pipeline and economic lifeline.
“We have the tap,” Mr Erdogan said. “The moment we close the tap, then it’s done,” he added, though he stopped short of saying he would go ahead and block the roughly 550,000 barrels a day of landlocked Kurdish oil that flows to his country’s Mediterranean port of Ceyhan. Kurdish oil exports have soared since 2014, allowing the Kurdistan Regional Government to plan for an eventual push for independence from Iraq, despite opposition from the US, Turkey and Iran, which fear more instability in the region.
The oil market has so far, however, been relatively sanguine about the threat to Kurdish exports, which have been helped by international trading houses Vitol, Trafigura, Petraco and Glencore, as well as Russia’s state-backed oil company Rosneft.
Meanwhile West Texas Intermediate, the US benchmark, was little changed at $52.15 in early trading a barrel on Tuesday. It climbed 3.1 per cent in New York to $52.22 a barrel on Monday, the highest level since April. Supporting crude’s recent gains have been strong imports from China as the country builds its strategic petroleum reserve, which Beijing is growing to cushion the world’s second-biggest economy from future energy shocks.
Asian demand is in focus as the global oil trading community flocks to Singapore this week for the annual Asia Pacific Petroleum Conference. Mohammed Barkindo, secretary-general of the Opec cartel, told the event via video link that crude exports from the Middle East to Asia were expected to increase by 7.5m b/d between 2016 and 2040, to 22m b/d.
“So for the foreseeable future, we can count on the Asia Pacific to be the primary outlet for Opec and Middle Eastern export barrels,” said Mr Barkindo. His comments come as US oil producers, traders and energy services companies are coming to Singapore in search of buyers for their crude, threatening to steal a slice of Opec’s market share.
Ms Kong at BP, who runs the oil major’s sizeable trading operations from the Middle East to China, said China’s buying of excess barrels was helping to tighten supplies after a three-year glut. “China has helped to clean up the market.”
Source: www.ft.com
