Oil prices up on Mideast tensions, China import increase

Oil prices rose on Friday after data showed increased Chinese crude imports. QEP Resources photo.

Oil prices up over 1 per cent

Oil prices rallied on Friday on news that unrest in the Middle East involving Iran and Iraq could impact oil exports from the region as well as increased Chinese crude imports.

Brent crude was up 1.07 per cent, or 60 cents to $56.85/barrel by 1:55 p.m. EDT and US WTI rose by 52 cents to $51.12/barrel. Western Canadian Select was down 31 cents to $39.89/barrel.

According to Reuters, both Brent and WTI hit their highest mark since September earlier in the session. Brent is on track for a weekly gain of 3 per cent and WTI could see a boost of 4 per cent.

Analysts say markets are finally rebalancing after years of excess supply, but warn that the market for 2018 still appears uncertain.

Last month, Chinese oil imports rose to 9 million barrels per day (b/d). Between January and September, imports averaged 8.5 million b/d. The increase in imports is driven by purchases for its strategic petroleum reserves, which now amount to about 850 million barrels, according to the International Energy Agency.

“We woke up with the strong data from China. That’s on the supportive side,” Olivier Jakob, managing director of oil consultancy PetroMatrix told Reuters.

Another factor in rising oil prices is unrest in the Middle East. Tensions in Iraq have grown since Iraqi Kurds voted overwhelmingly in favour of independence in a referendum in late September.

Reuters reports the Kurdish region vice president said Kurdish troops have been sent to the the Iraqi oil region of Kirkuk to confront “threats” from the Iraqi government.

As well, possible US action on the Iran nuclear deal supported prices. President Donald Trump announced a new strategy on Friday, and threatened to pull out of the Iran nuclear agreement if Congress and US allies do not strengthen it.

Trump’s comments have thrown the future of the agreement reached by former President Barrack Obama and major world powers into doubt. During a major speech from the White House, Trump said Iran had committing “multiple violations of the agreement.”

The president’s belief is opposed by the International Atomic Energy Agency, America’s European allies and some members of his own government that say Iran is complying with the 2015 deal.

On Friday, Baker Hughes reported the US oil rig count fell by five to 743, but is up 311 from this time last year. In Canada, the oil rig count is unchanged and remains at 112, up 22 from one year ago.

Analysts continue to look for OPEC to extend its supply cut pact to clear global stocks.

“OPEC-led cuts have breathed new life into oil bulls but unless the organization digs deeper, the drawdown in global oil stockpiles will soon fizzle out,” Reuters reports PVM’s Stephen Brennock wrote.