Oil prices rise on Iraq conflict, Iran sanction concerns

Crude oil prices climbed on Monday, driven by heightened geopolitical concerns as Iraqi forces moved towards the oil-rich city of Kirkuk, which is dominated by Kurdish people.

Global benchmark Brent crude was up 1.2 percent at $57.84 per barrel (bbl) as United Arab Emirates equity markets began trading. US marker West Texas Intermediate (WTI) crude was last trading higher by 0.8 percent at $51.88/bbl.

“Oil futures are moving higher to start the week as the market assesses the heightened geopolitical risks that emerged over the weekend,” Edward Bell, director of commodity research (global markets and treasury) at Emirates NBD, told Argaam.

“The chances of a clash in Iraq between KRG (Kurdistan Regional Government) and the central government forces, and the potential disruption to oil supplies, looks particularly acute,” he added.

The prices might also find support from the potential for the US to re-impose economic sanctions on Iran, as the move could limit crude volumes coming from the OPEC member, Bell said.

On Friday, US President Donald Trump refused to certify that Tehran is complying with the Iran nuclear deal, which had helped ease international sanctions against the country.

Under US law, the president must certify every 90 days to Congress that Iran is complying with the deal, Reuters reported. The US Congress now has 60 days to decide whether to re-impose sanctions on Iran.

According to Bell, in the near-term prices for Brent crude could rise to as much as $60/bbl. “But the large amount of inventories still in place around the world will act as a hard ceiling on upside,” he said.

Write to Nadeshda Zareen at nadeshda.zareen@argaamplus.com