Oil prices mixed, despite reduction in Iraq output, US rig count

Oil prices were mixed on Monday, with Brent dropping slightly and US WTI making small gains. Anadarko photo.

Oil prices mostly held onto last week’s gains

Oil prices were mixed on Monday, but hung onto last week’s gains due to supply disruptions in northern Iraq and a decline in US drilling.

Benchmark Brent dropped 17 cents by 12:58 p.m. EDT to $57.58/barrel and US WTI was up 20 cents to $52.04/barrel. The Canadian Crude Index was down 79 cents to $38.73.

Reuters analysts say the drop in the number of rigs reported by Baker Hughes on Friday is likely temporary and is mostly due to recent hurricane threats.

In the week ending Oct. 20, there were 739 oil rigs in the US, down seven from the previous week. That is the lowest rig count since June, according to Baker Hughes.

“The market is in a tug of war between short-term bullish drivers which are very true, very visible and very strong versus real concerns for the oil market balance for 2018,” Bjarne Schieldrop, chief commodities analyst at SEB Markets told Reuters.

Recently, tensions in the Kurdistan region of northern Iraq have been high after a referendum last month where Kurds voted overwhelmingly for independence from Iraq.

On Monday, Iraqi forces deployed tanks and artillery near a Kurdish-held area where a section of the Kurdish oil export pipeline is located, according to Reuters’ security sources.

Oil exports from the region were about 255,000 barrels per day (b/d) on Monday, down from a typical rate of about 600,000 b/d.

On Saturday, Iraqi Oil Minister Jabar al-Luaibi said oil exports from Iraq’s southern Basra region would be increased by 200,000 b/d to make up for some of the shortfall from the Kirkuk fields.

Saudi Arabia’s Energy Minister Khalid al-Falih praised his country’s and Iraq’s collaboration within OPEC on the plan to cut production to boost oil prices during a landmark visit to Iraq.

According to Reuters, Iraq said it would continue to cooperate in implementing export plans laid out by the cartel.

Next month, OPEC will meet in Vienna. Members are expected to announce any decisions on the supply cut pact, which many believe will be extended past the March 2018 deadline.

Frank Schallenberger, head of commodity Research at Landesbank Baden-Wuerttemberg told Reuters that any further steps by OPEC, increased global crude demand and a drop in US drilling activity could boost oil prices, at least in the short term.

“I wouldn’t be surprised to see WTI going up to $55 a barrel and Brent to $60 a barrel before the beginning of November,” he said.