Oil prices rose more than $3 on Monday as Iraq’s halt on some crude exports from its semi-autonomous Kurdistan region revved up a market moving higher as worries about a financial crisis eased on news of a U.S. banking acquisition.
Brent crude futures settled up $3.13, or 4.2%, at $78.12 a barrel. West Texas Intermediate U.S. crude closed $3.55, or 5.1%, higher at $72.81.
Brent gained 2.8% last week while WTI rebounded by 3.8% as jitters in the banking sector eased.
Prices received a lift as Turkey stopped pumping crude from Kurdistan via a pipeline following an arbitration decision that confirmed Baghdad’s consent was needed to ship the oil. The exports amount to about half a per cent of global oil supply, or 450,000 barrels per day (bpd).
Loss of oil supplies from Kurdistan could offset the impact of Russian production and supplies finding their way to market, said John Kilduff, partner at Again Capital LLC in New York. It also could force production cuts in the Kurdistan region.
“Now we have this new wrinkle here … It’s production that we really can’t afford to lose,” Kilduff said, adding that the loss of supply would amplify any other future force majeure or production outages.
First Citizens BancShares Inc said it will acquire deposits and loans of failed Silicon Valley Bank, closing one chapter in the crisis of confidence that has roiled financial markets.
“Oil prices are edging higher extending gains from the previous week as investors weighed up efforts by the authorities to calm concerns regarding the global banking system,” said Fiona Cincotta, senior financial markets analyst at City Index.
There are also hopes for extra support for bank funding after reports that U.S. authorities were in early deliberations about expanding emergency lending facilities.
Wall Street equities gained as the banking deal offered a respite after weeks of turmoil.
Oil prices also drew support from worries of geopolitical turmoil after Russian President Vladimir Putin’s plans to station tactical nuclear weapons in Belarus, one of Russia’s most pronounced nuclear signals yet.
Russian Deputy Prime Minister Alexander Novak has said Moscow is close to achieving its target of cutting crude output by 500,000 barrels per day (bpd) to about 9.5 million bpd.
Still, Russia’s crude exports are expected to remain steady as it cuts refinery output in April, data from industry sources and Reuters calculations showed on Friday.
On the demand side, China’s crude oil imports are expected to rise 6.2% in 2023 from last year’s level to 540 million tonnes, according to an annual forecast by a research unit of China National Petroleum Corp on Monday.