Oil Fluctuates Amid Concerns Over Kurdish Referendum--Update

By Neanda SalvaterraFeaturesDow Jones Newswires

Oil prices fluctuated Friday as investors considered the potential fallout from the independence referendum in the oil-rich Kurdish region of Iraq.

Brent crude, the global oil benchmark, fell 0.10% to $57.35 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.04% at $51.58 a barrel.

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"We have had a bull rally in oil since late June and then it got an additional spark forward from the Kurdish referendum," said Bjarne Schieldrop, chief commodities analyst at SEB Markets. "It's the first time since 2014 that geopolitical risk has impacted the oil price."

Brent remained about $2 below the two-year high it achieved on Monday after the referendum when it hit its highest settlement since July 2015 and closed at $59.02 a barrel.

Kurdish voters overwhelmingly cast their ballot in favor of independence from Iraq on Monday.

The vote result may trigger a hostile response from Iraq's central government, as well as from neighboring countries and disrupt the flow of as much as 500,000 barrels a day of Kurdish oil exported through a Turkish port.

Baghdad has called on other countries to stop buying oil from the Kurds and has given the region until Friday to surrender control of its airports or face a forced shutdown of international flights.

The Kurdish referendum has also rankled Iran and Turkey as both have Kurdish minorities and fear the referendum could bolster claims for autonomy by militant Kurdish separatists in their regions.

Turkish president Recep Erdogan has threatened to block Kurdish oil exports transiting through his country's territory. Investors will be watching especially for what Ankara says in response to the outcome of the referendum.

"It is important to look at what Erdogan does," said Helima Croft, chief commodities for RBC Capital Markets. "If he is serious about this threat then we will see higher prices."

Some investors doubt Turkey's resolve as the country has grown dependent on the revenue generated by the trade in Kurdish crude oil.

Recently prices have also received support from the Organization of the Petroleum Exporting Countries' ongoing effort to eliminate about 2% of global supply with the help of external producers such as Russia.

OPEC said commercial inventories have fallen by nearly half of the target since the beginning of 2017 which leaves "only another 170 million barrels to go," said analysts for JBC in a recent report.

Lastly, U.S. crude oil production inched up last week to reach 9.55 million barrels per day slightly under its 2015 peak.

However some analysts are confident that U.S. production may not increase much further as crude spot prices are higher than future contracts, making it more difficult for U.S. shale oil producers to continue to finance their future production.

On Friday. investors will be watching for data from the oil-services firm Baker Hughes Inc., which releases its count of active drilling rigs, a bellwether for production in the U.S. oil industry.

Nymex reformulated gasoline blendstock--the benchmark gasoline contract--rose 0.44% to $1.62 a gallon. ICE gasoil changed hands at $549.75 a metric ton, down $1.00 from the previous settlement.

Benoit Faucon contributed to this article.

Write to Neanda Salvaterra at neanda.salvaterra@wsj.com

(END) Dow Jones Newswires

September 29, 2017 07:38 ET (11:38 GMT)