Brent crude hits 26-month high
Tokyo — Oil prices extended gains on Tuesday, with Brent crude hitting a 26-month high, supported by Turkey’s threat to cut crude flows from Iraq’s Kurdistan region to the outside world.
London Brent crude for November delivery was up 46c at $59.48 a barrel by 3.56am GMT after settling up 3.8% on Monday. Earlier it hit $59.49, the highest since July 10, 2015.
US crude for November delivery was up 15c at $52.37, after hitting $52.43, a five-month high.
Brent’s rise meant it extended gains for a fifth straight day, jumping from just more than $55 a barrel a week ago, as Opec and non-Opec producers confirmed the market was well on its way towards rebalancing, while oil demand looked strong.
Also fuelling the jump on Tuesday was Turkish President Tayyip Erdogan’s threat on Monday to cut off the pipeline that carries oil from northern Iraq to the outside world, intensifying pressure on the Kurdish autonomous region over its independence referendum.
The pipeline to Turkey’s port of Ceyhan usually pumps between 500,000 and 600,000 barrels a day.
"The high compliance of producers in jointly curbing output as well as the news of [Turkey’s response to] the referendum have helped oil prices," said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo. "Brent prices could top $60 [a barrel], supported by the short squeeze."
US crude has lagged behind in comparison amid a large oversupply compounded by Hurricane Harvey, which forced the closure of nearly 25% of US refining capacity.
Refineries in Philadelphia have cut rates because crude deliveries have been slowed by rough seas as Hurricane Maria headed north along the Atlantic Coast.
The spread between West Texas Intermediate (WTI) and Brent futures widened to $7.17, its steepest since August 2015.
US crude inventories were expected to have risen by 2.3-million barrels last week, a preliminary Reuters poll showed on Monday ahead of data by the Industry group the American Petroleum Institute.
Analysts forecast that stockpiles of petrol probably fell by 1-million barrels, while distillate inventories, which include heating oil and diesel fuel, were projected to fall 2.5-million barrels.
The institute is scheduled to release its data for last week at 8.30pm GMT.