Iraq-Kurdistan conflict drives up oil prices

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(Financial Times) Crude oil was the standout mover on early Monday trading as conflict between Iraqi and Kurdish forces broke out south of the oil-rich city of Kirkuk, with energy stocks in Europe and Asia climbing.

The Kurdistan Regional Government fighters have held the city for the past three years, but the city’s inclusion in last month’s independence referendum, in which Kurds voted overwhelmingly to leave Iraq, has enraged Baghdad and has drawn strong opposition from Iran and Turkey.

A senior Kurdish official said fighting erupted south of Kirkuk on Monday, with Kurdish forces striking four vehicles belonging to Iraqi Shia militias.

The oil rises add to recent strength in Brent crude, which in September touched its highest level since January and has not surpassed $60 since mid-2015. Analysts at Bank of America Merrill Lynch suggested late last week that oil prices had “firmed up more than we expected”, leading them to adjust their forecasts higher. They expect Brent to average $54 this quarter.

“Geopolitics is a particularly notable risk in 2018 given the lowest levels of supply disruptions in five years in global oil markets,” they wrote.