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Saturday, Oct 01, 2022

Oil retreats after Iraq calms supply nerves following clashes

Oil retreats after Iraq calms supply nerves following clashes

Oil declined after increasing by the most in six weeks after Iraq’s state marketing company said exports haven’t been affected by violent clashes in Baghdad.
West Texas Intermediate futures pared part of Monday’s price jump with some of the supply concerns from OPEC’s second-biggest producer easing. A tight market, exacerbated by a separate outbreak of violence in Libya, has countered worries over the global economy in recent days, and any disruption in Iraq would have driven prices much higher.

Oil has received a push after Saudi Arabia warned that it was possible the Organization of Petroleum Exporting Countries and its allies, which convene Sept. 5, would reduce production as futures prices didn’t reflect fundamentals. Other members of the alliance signaled their support. Separately, Goldman Sachs Group Inc. struck a bullish note, urging investors in a note Monday to “buy commodities now, worry about the recession later.

But some of the risks over a further tightening of supply eased with Iraq’s comments. The country has the capacity to boost exports to all destinations and won’t refuse any requests for more oil, Alaa Al-Yassiri, the director general of SOMO, said in an interview. Violence has been reported in the center of Baghdad, far from the main production-and-export hub of Basra in the south and other important areas north of the capital.

“The political situation remains difficult in Iraq, but the latest headlines appear to calmed concerns in the oil market about supply disruptions, said Amrita Sen, chief oil analyst at consultant Energy Aspects.

Traders are also keeping a close watch on a potential supply boost from Iran as negotiations over reviving a nuclear deal continue. The US and Iran remain at loggerheads over key details of an emerging agreement, and may need several weeks to resolve their differences.

“It seems OPEC+ isn’t interested in the oil price slipping much below $100 a barrel, said Craig Erlam, a senior market analyst at Oanda. While that would be “put to the test in the event of a nuclear deal, which still looks very challenging, or a global recession, the words alone could keep prices high for now, he said.
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