Oil near $49 after attack on small Iraqi wells, stimulus hopes

Oil held near $49 a barrel after two tiny Iraqi oil wells were attacked and markets globally rose on the prospect of additional U.S. stimulus.

Brent futures rose 0.2 per cent, flipping between gains and losses. Civil defense teams are trying to put out a blaze at the wells in the Khabbaz field, local police said, though the nation’s oil ministry said the fields were only pumping 2,000 barrels a day at the time of the attack.

Crude’s gains were also aided by a rally in global stock markets on hopes for further U.S. stimulus support. Equities had climbed across Asia and the dollar weakened, boosting the value of commodities priced in the currency.

Benchmark Brent prices are now nearing $50 a barrel, a level they’ve struggled to surpass in recent weeks. Prices have climbed to near a nine-month high as the development of coronavirus vaccines improves the demand outlook next year. The incident in Iraq offered a reminder that security challenges in some key producing countries haven’t disappeared too.

“We are going to enter a wait-and-see period as to how fast a covid-vaccine rollout will take place, as the pace of the roll out will shape futures expectations around oil demand recovery,” said Harry Tchilinguirian, oil strategist at BNP Paribas SA. Production disruption in Iraq is “modest” and something the market is used to dealing with, he said.

Prices

  • Brent for February settlement climbed 0.2 per cent to $48.92 a barrel at 11:26 a.m. in London
  • West Texas Intermediate for January delivery rose 0.3 per cent to $45.74

Benchmark Brent prices are now nearing $50 a barrel, a level they’ve struggled to surpass in recent weeks. Prices have climbed to near a nine-month high as the development of coronavirus vaccines improves the demand outlook next year. The incident in Iraq offered a reminder that security challenges in some key producing countries haven’t disappeared too.

“We are going to enter a wait-and-see period as to how fast a covid-vaccine rollout will take place, as the pace of the roll out will shape futures expectations around oil demand recovery,” said Harry Tchilinguirian, oil strategist at BNP Paribas SA. Production disruption in Iraq is “modest” and something the market is used to dealing with, he said.

Iraq has experienced bouts of unrest ever since the overthrow of Saddam Hussein. While the latest attacks underscore the fact that the region – where production has expanded sharply in recent years – is still prone to tensions, there’s no evidence of a meaningful impact on output.

In physical oil markets, demand from Asian buyers appears robust for now. Indian Oil Corp. issued another tender for prompt cargoes of Middle Eastern crude, while China’s teapots have been buying crude from as far afield as the North Sea for arrival early next year.

The American Petroleum Institute reported a 6.44 million barrel increase in gasoline inventories, which would be the biggest since April if confirmed by official figures due Wednesday. That comes as COVID-19 cases rise in U.S. coastal states and data show traffic dropping in New York.

© 2020 Bloomberg L.P.

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