Oil holds ground, settles near 3-week high

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Oil holds ground, settles near 3-week high

Oil settled little changed on Tuesday, but fighting in Iraq and tensions between the U.S. and Iran kept prices at their highest level in nearly three weeks.

“Geopolitical risk supported the initial move higher, but we’ve pushed to price levels that are clearly attractive to U.S. shale producers,” Robbie Fraser, commodity analyst at Schneider Electric, told MarketWatch.

November West Texas Intermediate crude CLX7, +0.39% tacked on a penny to settle at $51.88 a barrel on the New York Mercantile Exchange after tapping a high of $52.25. It settled at its highest level since Sept. 27 for a second session in a row. Brent crude for December LCOZ7, +0.62% rose 6 cents, or 0.1%, to $57.88 a barrel—also its highest since late September.

“WTI prices have found some breathing room above the $50 [a barrel level] and the market is increasingly concerned that those levels will trigger rising rig counts and stronger production growth further down the line,” said Fraser. “So long as the market has faith in a U.S. production response, we should keep seeing this secondary move to sell any price rally.”

A monthly report from the Energy Information Administration released Monday showed expectations for a rise of 81,000 barrels a day to 6.12 million barrels a day in shale-oil production from seven key U.S. shale regions in November.

Elsewhere, Iraqi forces clashed Monday with fighters from Iraq’s semiautonomous Kurdish region in the oil-rich province of Kirkuk, in a continuing standoff over Kurdish independence. The violence followed a referendum late September in which the Kurds voted overwhelmingly in favor of independence, in defiance of the central government in Baghdad and other regional powers.

What Are the Consequences of Kirkuk Fighting?
While the events have “already triggered some crude-supply disruptions in the oil-rich area, Iraq has stated that any drop in crude production should be limited and temporary,” said Fraser.

Iraqi Kurdistan exports nearly 600,000 barrels of oil a day, mainly via a pipeline that runs through Turkey. With Iraqi forces now in control of some Kurdish oil fields, much of these exports could be blocked, experts say.

Meanwhile, uncertainty surrounding the international agreement with Iran to curb the Islamic Republic’s nuclear program in exchange for sanctions relief has also supported prices. President Donald Trump last week refused to recertify the 2015 deal, punting a decision to Congress on whether to impose fresh sanctions on Iran.

Oil traders also await weekly data on U.S. petroleum supplies due out from the American Petroleum Institute late Tuesday and the EIA Wednesday morning. Analysts polled by S&P Global Platts expect the EIA to report a weekly drop of 3.9 million barrels for crude supplies, along with declines of 340,000 barrels for gasoline and 2 million barrels for distillate stockpiles