Oil prices down after recent gains due to profit-taking

Oil prices down over 1 per cent

After four days of gains, oil prices were down over 1 per cent on Thursday on larger-than-expected product inventories in the US and profit taking.

Brent crude ended the day down 75 cents, or 1.6 per cent, landing at $57.23/barrel and US WTI fell by 7 cents to $51.29.

According to a Reuters report, Kurdish officials say thousands fearing persecution have fled from the Kirkuk area since Iraqi forces retook the region following a referendum on area independence.

Iraq says it expects to restore oil production in Kirkuk to last week’s levels by Sunday.  However, Chevron says its has temporarily suspended oil and gas drilling activity in Iraqi Kurdistan.

Uncertainties in the Middle East continue following President Donald Trump’s refusal to certify Iran’s compliance with the nuclear deal.  Congress now has 60 days to decide further action against Iran, even though other participants in the pact say Tehran is complying with the agreement.

Previous sanctions against Iran resulted in a reduction of exports by about 1 million barrels per day (b/d).  However, should the US call for more sanctions, it may not receive support from other countries as it has in the past.

Ongoing tensions in the Middle East have helped boost oil prices, but many analysts say such risk premiums are now priced into the market.

“The geopolitical risk that came rushing into the market is starting to come out,” John Kilduff, a partner at hedge fund Again Capital LLC told Reuters.

Meanwhile, in Nigeria, Shell’s subsidiary company, SPDC, lifted a force majeure on Thursday on Bonny Light crude exports.

Analysts say there has been some profit-taking after two weeks of gains and energy equities also fell to three-and-a-half week lows.

On Wednesday, oil prices slipped after the US Energy Information Administration reported a significant drop in US refining rates and an unexpected build in fuel stocks, signalling slowing demand in the US.

The EIA also reported a drop of 5.7 million barrels in US crude inventories and an 11 per cent decline in US crude output, dropping to 8.4 million b/d.  The decline was due to Hurricane Nate.