NEW YORK (Reuters) – Oil prices slipped on Thursday, further backing off from 2015 peaks hit earlier in the week as tension around northern Iraq following the Kurdistan region’s vote in favor of independence spurred fresh supply concerns.
Crude has risen sharply in the last two-and-a-half weeks as traders anticipated renewed demand from U.S. refiners who were resuming operations after shutdowns due to Hurricane Harvey. Major world oil producers have also indicated that they will stick with output cuts to limit supply.
U.S. crude has gained 9 percent in 14 trading days, with Brent up 7 percent in that time. Both benchmarks are near overbought levels, based on an index of relative strength, which measures the speed and magnitude of price movements.
“We’ve made a really impressive run here and I do think we’re due for a pullback,” said Robert Yawger, director of energy futures at Mizuho in New York.
U.S. crude settled down 58 cents, or 1.1 percent, to $51.56 a barrel after reaching a five-month intraday high of $52.86.
Brent ended down 49 cents, or 0.9 percent, at $57.41 a barrel, after hitting a more than two-year high of $59.49 on Tuesday after Monday’s referendum vote prompted Turkey to threaten to close the region’s oil pipeline.
Iraqi Kurdistan voted overwhelmingly in favor of independence, prompting Turkish President Tayyip Erdogan to say he could use force to prevent the formation of an independent Kurdish state and might close the oil “tap”.
“Kurdistan and northern Iraq now export 500,000-550,000 barrels per day (bpd). That would be a big loss to the market,” said Tamas Varga, analyst at brokerage PVM Oil Associates.
Turkey promised on Thursday to deal only with the Iraqi government on crude, the office of Iraqi Prime Minister Haider al-Abadi said.
Brent’s premium over U.S. crude widened to a more than two-year high this week, in part due to reduced demand stemming from Harvey.
Yawger noted that a sharp drawdown in U.S. distillate inventories – diesel and heating oil – ahead of the busy winter season should spur demand for crude in coming weeks, keeping any selloff modest.
“I tend to believe there’s some good fundamentals here. The OPEC situation should keep Brent relatively elevated, and the distillate situation is so far behind the 8-ball that the margin is trading at $25,” he said.
The heating oil crack spread, a measure of the profit margin for refining crude into diesel or heating oil, fell to $24.97 on Thursday. Diesel inventories in the United States are currently seven percent below the seasonal average during this decade, according to the U.S. Energy Department.