NEWS

Oil prices climbed on Friday, marking their first quarterly gain of 2017, as investors considered the potential fallout from the independence referendum in the oil-rich Kurdish region of Iraq.

November West Texas Intermediate crude added 11 cents, or 0.2%, to settle at $51.67 a barrel on the New York Mercantile Exchange. The front-month contract was up about 2% for the week, up 7.7% for the month and saw quarterly rise of 10.5%, according to FactSet data. Based on the most-active contracts, however, prices were up around 12% from the August WTI settlement of $46.04 at the end of June. November Brent crude the global oil benchmark, tacked on 13 cents, or 0.2%, to $57.54 a barrel on London’s ICE Futures exchange. The contract, which expired at the session’s end, gained roughly 1.1% for the week, 8.8% for the month and 16.6% for the quarter.

“A tug-of-war is developing again, this time between the threat to supply in northern Iraq and growing output from U.S. shale,” said Enrico Chiorando, an analyst at energy consultancy Love Energy. “Shale production has been increasing and will continue to weigh on prices, following Brent’s longest weekly bull run since June 2016 and its fifth-consecutive weekly gain.” Kurdish voters overwhelmingly cast their ballot in favor of independence from Iraq on Monday. The vote result may trigger a hostile response from Iraq’s central government, as well as from neighboring countries and disrupt the flow of as much as 500,000 barrels a day of Kurdish oil exported through a Turkish port. Baghdad has called on other countries to stop buying oil from the Kurds and has given the region until Friday to surrender control of its airports or face a forced shutdown of international flights.

The Kurdish referendum has also rankled Iran and Turkey as both have Kurdish minorities and fear the referendum could bolster claims for autonomy by militant Kurdish separatists in their regions. Turkish president Recep Erdogan has threatened to block Kurdish oil exports transiting through his country’s territory. Investors will be watching especially for what Ankara says in response to the outcome of the referendum. “It is important to look at what Erdogan does,” said Helima Croft, chief commodities for RBC Capital Markets. “If he is serious about this threat then we will see higher prices.” Some investors doubt Turkey’s resolve as the country has grown dependent on the revenue generated by the trade in Kurdish crude oil.

Brent prices have eased back from the two-year high above $59 it saw Monday after the referendum. Recently prices have also received support from the Organization of the Petroleum Exporting Countries’ ongoing effort to eliminate about 2% of global supply with the help of external producers such as Russia.

OPEC said commercial inventories have fallen by nearly half of the target since the beginning of 2017 which leaves “only another 170 million barrels to go,” said analysts for JBC in a recent report. Meanwhile, U.S. crude oil production inched up last week to reach 9.55 million barrels a day slightly under its 2015 peak, and data Friday showed an uptick in the number of active U.S. oil-drilling rigs for the first time in four weeks. Baker Hughes Inc. reported a rise of 6 to 750 oil rigs this week.