US crude has gained 9 percent in 14 trading days, with Brent up 7 percent in that time. Both benchmarks are near overbought levels, based on an index of relative strength, which measures the speed and magnitude of price movements. We've made a really impressive run here and I do think we're due for a pullback," said Robert Yawger, director of energy futures at Mizuho in New York.
US crude fell 72 cents to $51.42 a barrel by 1:48 a.m. ET (1748 GMT) after reaching a five-month intraday high of $52.86. Brent was down 62 cents at $57.28 a barrel, after hitting a more than two-year high of $59.49 on Tuesday after Monday's referendum vote prompted Turkey to threaten to close the region's oil pipeline.
"Kurdistan and northern Iraq now export 500,000-550,000 barrels per day (bpd). That would be a big loss to the market," said Tamas Varga, analyst at brokerage PVM Oil Associates. Iraqi Kurdistan voted overwhelmingly in favour of independence, prompting Turkish President Tayyip Erdogan to say he could use force to prevent the formation of an independent Kurdish state and might close the oil "tap".
Turkey promised on Thursday to deal only with the Iraqi government on crude, "restricting oil export" operations to Baghdad, the office of Iraqi Prime Minister Haider al-Abadi said. Torbjorn Soltvedt, principal analyst for the Middle East at risk consultancy Verisk Maplecroft, said there was a roughly 20 percent chance that the pipeline linking northern Iraq and Ceyhan in Turkey would be shut.
Brent's premium over US crude widened to a more than two-year high this week, in part due to reduced demand stemming from Harvey, but it has since narrowed and could tighten further in coming weeks due to higher margins for refined US products. Yawger noted that a sharp drawdown in US distillate inventories - diesel and heating oil - ahead of the busy winter season should spur demand for crude in coming weeks, keeping any selloff modest.
Copyright Reuters, 2017