Oman crude oil prices continued to rally on Tuesday to a more than three-year high amid strong demand.
Oman oil price November delivery jumped 82 cents to reach $56.76 per barrel compared to $55.94 per barrel in the previous trading session on the Dubai Mercantile Exchange (DME).
The average price of Oman oil (October delivery) has increased $2.76 to touch $50.39 per barrel compared to September delivery, DME said.
Brent crude futures fell 38 cents to $58.64 a barrel by 1001 GMT, having hit $59.49, the highest since July 2015 and more than 34 per cent above the 2017 low.
US crude futures slid 25 cents to $51.97 a barrel, after hitting a five-month high of $52.43.
The sharp uptick in Oman crude values the past few days has been attributed to strong demand from Asian end-users eager to cover their requirements for November-loading cargoes before the end of the current trading cycle on Friday.
“Some end-users bought [the crude to cover] some shorts,” a Singapore-based crude trader said.
Traders have also attributed the uptick to some demand from China’s independent refineries keen to utilise their crude import quotas before they expire at the end of the year.
China is the biggest importer of Omani crude with an estimated 65 per cent of Oman crude exports in July destined to China, according to the latest data from National Center for Statistics and Information.
On Tuesday, Turkish President Tayyip Erdogan repeated a threat to cut off the pipeline that carries 500,000-600,000 barrels per day (bpd) of crude from northern Iraq to the Turkish port of Ceyhan, intensifying pressure on the Kurdish autonomous region over its independence referendum.
This potential loss, combined with 1.8 million bpd of output reductions by Opec and non-Opec producers, raised concerns of tighter supply.
“Although there was plenty of price-bullish news making headlines yesterday, undoubtedly the biggest factor was the referendum in the Kurdistan region of Iraq,” analysts at Vienna-based JBC Energy said in a note.
Top oil executives gathered at the S&P Global Platts APPEC conference in Singapore said strong oil demand this year was accelerating market rebalancing and helping inventory drawdowns.
“Global demand growth is way higher than what we have observed in the last couple of years, coming somewhere close to 1.6 to 1.7 million barrels per day and is driven by distillates,” said Janet Kong, BP’s chief executive officer, supply and trading, Eastern Hemisphere.
Opec and non-Opec producers meeting in Vienna last week said the market was well on its way towards rebalancing.
However, other analysts were sceptical about further price gains due to higher oil output from the US.
(With inputs from agencies)