Crude oil extended gains on Monday after Iraqi forces captured a military base, oil fields and an airport outside Kirkuk in the Northern part of Iraq.
Brent crude oil rose 1.5 percent to $58.02 a barrel on Monday as at 1:45 p.m. Nigerian time. While, West Texas Intermediate gained 1.2 percent to $52.06 a barrel.
The tension between the Iraqi and the semi-autonomous Kurdistan Regional Government started following an independence referendum by the Kurdistan Regional Government on September 25. Iraqi government alongside it allies, Turkey and Iran, have denounced the referendum saying it is illegal, with Turkey threatening to shut down Kurdistan shipment through its region.
Kurdistan which sits on reserves of about 45 billion barrels and exports around 600,000 barrels per day, may face tough time if Turkish government go through with the threat. However, experts believe the tension will ease global supplies and bolster oil prices.
“The Kurdistan tension is the main argument for the price gain,” said Bjarne Schieldrop, chief commodities analyst at SEB AB in Oslo. “The fact that the market now has started to react to geopolitical risks like this is clearly a reflection of an oil market with less abundance of oil.”
Again, with the Libya still struggling to restore oil production and currently producing about 1 million barrels a day, oil prices may remain high in the short-term and boost Nigeria’s foreign revenue generation that has plunged by 55 percent in the last 12 months.
“We’re still suffering from the lack of budget,’’ said Mustafa Sanalla, chairman of the National Oil Corp. Libya has explained its challenges to OPEC, which “understands the situation very well,’’ he added.
