Crude oil edged up on Tuesday, extending sharp gains from the previous session on supply disruption risks from Iraq.
Brent crude futures settled at $78.65 a barrel after adding 53 cents or 0.7 per cent, as the US West Texas Intermediate (WTI) crude closed at $73.20 a barrel after gaining 39 cents or 0.5 per cent.
Prices rallied at the start of the week by more than $3 after Iraq was forced to halt exports of about 450,000 barrels per day from its northern Kurdistan region through Turkey after an arbitration decision confirmed Baghdad’s consent was needed to ship the oil.
Oil firms in the region have been left in limbo as the pipeline stoppage is set to continue until Turkey, Iraq, and the semi-autonomous Kurdistan region find a settlement to resume exports.
Turkey stopped pumping Iraqi crude from the pipeline after Iraq won an arbitration case in which it said Turkey had violated a joint agreement by allowing the Kurdistan Regional Government (KRG) to export oil to Ceyhan without Iraq’s consent.
Also, Barclays, an investment bank, said any continued outage of Kurdish exports until the end of the year would imply a $3 a barrel upside to the bank’s $92 a barrel Brent price forecast for 2023.
The market still remained in high spirits after Monday’s announcement that First Citizens BancShares Inc will acquire deposits and loans of failed Silicon Valley Bank, easing an industry-wide fear.
Support also came from a weaker US Dollar, which makes oil less expensive for international buyers.
Oil prices also drew continued support from signs of recovering demand in China.
China’s crude oil imports are expected to rise by 6.2 per cent in 2023 to 540 million tonnes, an annual forecast by a research unit of China National Petroleum Corp. showed.
Also, crude oil inventories in the US fell this week by 6.076 million barrels, the American Petroleum Institute (API) data showed on Tuesday, in a major divergence from the 187,000 barrel build that was expected.
The total number of barrels of crude oil gained so far this year is still more than 53 million barrels.
This week, SPR inventory held steady for the eleventh week in a row at 371.6 million barrels—the lowest amount of crude oil in the SPR since December 1983.