Wednesday, 25 April, 2018

Commodities: Brent hits YTD high as Turkey threatens Kurdish oil exports

An oil pipeline in the Kurdistan Region An oil pipeline in the Kurdistan Region
Preston Stone | 29 September, 2017, 00:50

"We need not only to keep up the pace but continue our coordinated joint actions in full, but also work out a strategy for the future, to which we will stick starting from April 2018", he said, adding oil demand was rising at a "high pace".

"In spite of increases from US shale production, that kind of increase is enough to sop up" excess oil supply, Lipow said.

Turkey repeated a threat to cut off the pipeline that carries 500,000-600,000 barrels per day (bpd) of crude from northern Iraq to the Turkish port of Ceyhan.

Current OPEC compliance with production cut plans remains above their historical average, and it usually takes between two to three quarters for inventories to normalize after the cuts.

That complicates efforts by the Organization of the Petroleum Exporting Countries and other major producers to push oil higher through output curbs, as every rise in price encourages more US production.

United States shale producers' ability to ramp up output as later-dated crude prices strengthen will keep price volatility low, said Jeffrey Currie, Goldman Sachs' head of global commodities research. Distillate fuel inventories decreased by 0.8 million barrels last week and are in the lower half of the average range for this time of year.

How Boeing's Bombardier 'Victory' Threatens Its Commercial Sales Too
But it also "threatens to spark a trade war involving the US, Canada and the United Kingdom ", reports the Financial Times . Unite said Mrs May should personally intervene with Boeing and urged her to get the Canadian government to do the same.

Following glut in the worldwide crude oil market, OPEC had required its members to cut down on their oil production quota in order to stabilise prices in the global oil market.

Opec and non-Opec members including Russian Federation met in Vienna last week to discuss their deal to cut production by about 1.8m barrels per day (bpd), which runs to the end of March 2018. Meanwhile, OPEC and its partners implemented more than 100 percent of their agreed cuts last month, and the outlook for global demand has improved.

Investors just don't buy strength in crude oil because they think prices will be higher in the future.

Brent's premium over USA crude (WTCLc1-LCOc1) widened to a more than two-year high this week, in part due to reduced demand stemming from Harvey, but it has since narrowed and could tighten further in coming weeks due to higher margins for refined US products.

Brent crude hit a near two-year high of $59.49 on Tuesday, before sliding to $59.01 a barrel. Backwardation signals immediate market strength while contango shows traders prefer to store oil in the hope of fetching a higher price for later delivery. The nation's oil stockpiles have shrunk in nine of the last 12 weeks and are down more than 60 million barrels since March.

"It's pretty clear the Kurds are going to vote for independence and we will have yet another geopolitical hot spot in the Middle East that threatens a significant amount of oil supply", said John Kilduff, a partner at Again Capita.

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