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Oil Price Fundamental Daily Forecast – Prices Jump on Iraqi Military Action, Fear of New Sanctions Against Iran

U.S. West Texas Intermediate and international-benchmark Brent crude oil surged early Monday after Iraqi army units advanced toward Kirkuk, a major oil city that is populated by the country’s Kurdish people and which recently declared independence.

At 0439 GMT, December WTI crude oil is trading $52.15, up $0.42 or +0.81%. Internationally-favored January Brent crude oil is trading at $57.57, up $0.62 or +1.09%.

Crude Oil
Daily December West Texas Intermediate Crude Oil

According to the Associated Press which cited state-run television, the Iraqi national army has taken control of nearby areas claimed by the Kurds, and has done so without facing opposition from Kurdish peshmerga fighters. However, there were no confirmed reports of fighting.

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Iraq is the second-biggest oil producer in OPEC. Kurdish-controlled areas of Iraq are among the most productive in the country and contain much of its energy infrastructure.

Prices were also supported by concerns over renewed U.S. sanctions against Iran. On Friday, U.S. President Trump refused to formally certify that Tehran is complying with the accord even though international inspectors say it is.

During the previous round of sanctions against Iran, some 1 million barrels per day (bpd) of crude oil supplies were cut off global markets. Some traders don’t expect this potential new round of sanctions to be that large since the U.S. is likely to act alone, however, any move will likely be disruptive to supply.

In other news, according to General Electric Company’s Baker Hughes energy services firm said in its closely followed report late Friday the drillers cut five oil rigs in the week to October 13, bringing the total rig count to 743.

Brent Crude
Daily January Brent Crude

Forecast

Oil prices could move higher over the near-term because unlike the other military activity in the Middle East, this development involves oil. Not only will oil supply be distributed, but oil infrastructure could also be damaged or destroyed.

A potential battle in Kirkuk will be at the forefront over the near-term. Potential sanctions against Iran will come later. This is because under U.S. law, the president must certify every 90 days to Congress that Iran is complying with the deal. Additionally, the U.S. Congress will now have 60 days to decide whether to reimpose economic sanctions on Tehran that were lifted under the pact.

Earlier today, WTI crude oil overcame a key retracement area at $51.71 to $51.27, making these levels new support. If the upside momentum continues this week then its recent top at $53.11 will become the next upside target.

Brent crude oil gapped higher on the weekly chart which indicates strong buying. Its new support is $57.01 to $56.60. Its target is $58.35.

This article was originally posted on FX Empire

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