Crude’s September surge propels bull market run on demand optimism
HONG KONG and LONDON (Bloomberg) -- Oil was poised for its biggest quarterly gain in more than a year on forecasts for rising demand and Turkey’s threat to halt Kurdish exports through its territory after the region voted for independence from Iraq.
Futures were little changed in New York, up more than 9% in September. OPEC and the IEA this month boosted demand forecasts, signaling the surplus that has weighed on prices may shrink further. Iraq said Thursday that Turkey agreed to deal exclusively with its government over exports of Kurdish crude, a step that could disrupt shipments from the region that this week voted overwhelmingly for independence from Baghdad.
Oil this week returned to a bull market on signs the persistent crude surplus was finally starting to shrink, while Trafigura Group and Citigroup warned of the potential for a further supply squeeze in 2018. OPEC and Russia have hailed the success of their agreement to cut production and urged their allies to stay focused on finishing the job. U.S. Gulf Coast refiners restarted after last month’s hurricanes.
Prices rose sharply “as traders anticipated renewed demand from U.S. refiners resuming operations after shutdowns due to Hurricane Harvey,” analysts including Ashley Kelty at Cenkos Securities wrote in a note. Futures also gained as producers indicated “they will stick with output cuts to limit supply,” they said.
WTI for November delivery was at $51.54/bbl on the New York Mercantile Exchange, down $0.02. Total volume traded was about 32% below the 100-day average. Prices lost $0.58 to close at $51.56 on Thursday, and are up 12% this quarter, set for the biggest quarterly advance in more than a year.
Brent for November settlement, which expires Friday, was up 0.2%, or $0.14, at $57.55/bbl on the London-based ICE Futures Europe exchange after falling 0.9% on Thursday. Prices are up 10% this month and 20% this quarter. The global benchmark crude traded at a premium of $6.01 to WTI.
Global oil demand will climb this year by the most since 2015, the IEA said earlier this month in a report. OPEC raised its estimates for the amount of crude it will need to supply next year on increased demand projections for Europe and China, according to a separate report.
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Shale drillers and oil sands producers have posted some healthy profits so far this year, but it’ll take oil consistently above $50/bbl for their investments to pay off in the long run, according to a study by Moody’s Investors Service. Major airlines including Deutsche Lufthansa and Qatar Airways are preparing to halt services to Kurdistan as Iraq moves to sever outside ties with the autonomous region following Monday’s independence vote.
