Oil prices “due for a pullback”: Analyst
Oil prices fell slightly in trading on Thursday, dropping from earlier gains that were fuelled by concerns about the Kurdistan referendum where citizens voted overwhelmingly in favour of independence, raising the spectre of a supply outage.
WTI crude was down 76 cents to $51.38/barrel by 12:43 p.m. EDT and Brent dropped 78 cents to $56.79/barrel. Reuters reports both benchmarks are near overbought levels, based on an index of relative strength, which measures the speed and magnitude of price movements.
US crude rose by 9 per cent in the past 14 trading days and Brent increased by 7 per cent in that same time period and hit an over two-year high of $59.49 on Tuesday.
“We’ve made a really impressive run here and I do think we’re due for a pullback,” Robert Yawger, director of energy futures at Mizuho told Reuters.
The Kurdistan referendum prompted Turkish President Tayyip Erdogan to threaten the use of force to prevent the formation of an independent Kurdistan state. Turkey has warned it will cut off any crude exports from Kurdistan to ports in Turkey, and vowed to deal only with the Iraqi government on crude.
So far, the pipeline remains in operation.
“Kurdistan and northern Iraq now export 500,000-550,000 barrels per day (b/d). That would be a big loss to the market,” Tamas Varga, analyst at brokerage PVM Oil Associates told Reuters.
Middle East analyst, Torbjorn Soltvedt of Verisk Maplecroft, said there is about a 20 per cent chance that the pipeline linking the Kurdistan region of northern Iraq with Ceyhan in Turkey would be shut down.
The US Energy Information Administration reported a surprise decline in crude inventories on Wednesday. Yawger told Reuters that a sharp drawdown in US distillate stocks prior to winter will likely spur demand for crude in the coming weeks, keeping any selloff modest.
