Turkish President Tayyip Erdogan on Tuesday repeated a threat to cut off the pipeline that carries 500,000-600,000 barrels a day of crude from northern Iraq to the Turkish port of Ceyhan. "The more favourable supply-demand dynamic could see Brent crude reach $60 per barrel and two-year highs this year".
Brent crude futures for November slipped by 31 cents to $59.13 per barrel.
West Texas Intermediate for November delivery traded at US$52.10 (RM218.60) a barrel at 4.38pm after settling at US$51.88 on the New York Mercantile Exchange.
Further drawdowns in USA crude stocks are expected over the coming weeks as the country's gasoline and distillate inventories are replenished, said Abhishek Kumar, Senior Energy Analyst at Interfax Energy's Global Gas Analytics in London. OPEC secretary-general Mohammed Barkindo said this week that crude exports from the Middle East to Asian markets were expected to increase by 7.5 million barrels a day between 2016 and 2040, to 22 million barrels. Prices surged to US$52.22 on Monday, more than 20 per cent above their most recent low - the classic definition of a bull market.
There is also concern that the high compliance with the cuts that OPEC claims will start to slip if the Brent price rises above $60 a barrel and shows signs of staying there.
"Global demand growth is way higher than what we have observed in the last couple of years, coming somewhere close to 1.6 to 1.7 million barrels per day and is driven by distillates", said Janet Kong, BP's chief executive officer, supply and trading, Eastern Hemisphere.
Crude prices have risen more than 10 percent this month in NY as US refiners recovered from Hurricane Harvey and OPEC and the International Energy Agency sweetened their worldwide demand forecasts. The Department of Energy reported that over the last month product demand averaged 20.3 million barrels per day, up by 1.3% from the same period past year.
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Crude has risen sharply in the last two-and-a-half weeks as traders anticipated renewed demand from USA refiners who were resuming operations after shutdowns due to Hurricane Harvey. Moreover, the investment bank argued that OPEC probably shouldn't extend its production cuts anyway because the group could cede market share to other producers (i.e. USA shale). The total draw for crude oil in 2017 now stands at just shy of 23 million barrels.
On Friday, the Organisation of the Petroleum Exporting Countries and other producers will meet in Vienna to discuss the progress of their deal to limit output.