Oil price nears six-month high as Iraq clashes threaten supply

Onslaught: Kurdish fighters defend oilfields near Kirkuk after Kurdistan voted for independence last month
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Russell Lynch16 October 2017

Clashes between Iraqi and Kurdish troops inflamed tensions in the Middle East today, pushing the oil price close to six-month highs.

Iraqi troops rushed overnight to seize oil fields near the city of Kirkuk held by Kurdish forces in another escalation after the Kurdistan population voted for independence last month.

Brent crude jumped almost a dollar at one stage today to hit $58.15 a barrel amid worries over potential disruption to supply if a full-scale battle breaks out.

Iraq is the second largest producer behind Saudi Arabia in the Opec oil cartel, pumping around 4.5 million barrels a day.

The latest spike in crude prices also threatens a headache for the Bank of England’s inflation-watchers, who look increasingly certain to raise interest rates for the first time in a decade in November. Higher oil prices will feed through to pain at the petrol pump and put upward pressure on households’ gas and electricity bills.

The clashes were particularly damaging to London-listed Kurdish producer Genel, which largely pumps its crude through a 600-mile pipeline from Kirkuk to the Turkish port of Ceylan.

Shares in Genel fell 14p, or more than 10%, to 120.25p, although FTSE 100 oil majors BP and Royal Dutch Shell made ground.

Oil prices have also been supported by the threat of sanctions against Iran after US president Donald Trump broke ranks with other nations to declare that the country was in breach of its 2015 agreement on not developing nuclear weapons.

ETX Capital’s Neil Wilson said: “The prospect of fresh US sanctions may offer longer-term support to prices, although again any sanction regime will be limited in scope given that the US position is at odds with the rest of the international community.”

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