Oil prices soared more than 3 percent on Monday, with Brent hitting its highest in more than two years, after major producers said the global market was on its way to rebalancing, while Turkey threatened to cut oil flows from Iraq's Kurdistan region toward its ports.
The November Brent crude futures contract settled up$2.16, or 3.8 percent, at $59.02 a barrel, its highest since July, 2015.
U.S. West Texas Intermediate crude for November delivery rose $1.56, or 3 percent, to settle at $52.22 a barrel, the highest since April.
It's all driven by the idea that the production cut is starting to work and the rebalance is underway, said Gene McGillian, director of market research at Tradition Energy in New York.
Even as both contracts rallied, concerns about U.S. production growth weighed on WTI, widening its discount, he said.
The spread between WTI and Brent futures widened to $6.61, its steepest since August 2015.
Turkey has said it could cut off a pipeline that carries oil from northern Iraq to the global market, putting more pressure on the Kurdish autonomous region over its independence referendum.
The Iraqi government does not recognize the referendum and has called on foreign countries to stop importing Kurdish crude.
If this boycott call proves successful, a good 500,000 fewer barrels of crude oil per day would reach the market, Commerzbank said in a note.
The Organization of the Petroleum Exporting Countries, Russia and several other producers have cut production by about 1.8 million barrels per day (bpd) since the start of 2017, helping lift oil prices by about 15 percent in the past three months.
Credit:Reuters