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Crude Oil Bears Are Tracking Iraq and Kurdistan Talks

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Updated

Crude oil futures 

US crude oil (UCO) (DBO) (OIL) futures contracts for December delivery fell 0.02% and were trading at $53.90 per barrel in electronic trade at 2:20 AM EST on October 30, 2017. Likewise, December 2017 E-Mini S&P 500 (SPY) futures fell 0.2% to 2,573.5 in electronic trade during the same time.

US crude oil prices are at an eight-month high. High oil prices have a bullish impact on oil producers (XOP) (VDE) like Chevron (CVX), ExxonMobil (XOM), Newfield Exploration (NFX), and Energen (EGN).

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Supply outages in Kurdistan region  

Crude oil supply outages in the Kurdistan region helped crude oil (BNO) (UWT) (DWT) prices last week. On October 27, 2017, Iraqi troops suspended the fighting with Kurdistan forces. As a result, there were discussions about the control of the Kurdistan region and the oilfields. The second round of talks was held on October 29, 2017.

The tension between Iraq and Kurdistan has kept ~350,000 bpd (barrels per day) of crude oil production offline in Kurdistan. It also impacted crude oil exports through Kurdistan by 200,000 bpd—compared to the average exports of ~550,000 bpd.

Iraq plans for crude oil exports

Meanwhile, Iraq has increased its oil export capacity from its southern ports by 900,000 bpd to 4,600,000 bpd. Iraq’s government also requested that oil major BP (BP) develops the oilfields in Kirkuk.

Impact 

Kurdistan and Iraq depend on crude oil export revenues. The political tension could be short-lived due to the countries’ high debt and financial obligations. Ending the tension in Kurdistan and Iraq would likely increase supplies, which could pressure oil (SCO) (DBO) prices and impact energy producers’ (IXC) (IYE) earnings.

In the next part, we’ll discuss how the US dollar impacts oil prices.

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