Oil prices largely held on to last week's gains early on Monday, supported by supply disruptions in Iraq and a drop in U.S. drilling. But, as Kate King reports, OPEC is still expected to extend it's current output deal.
Kirkuk in Northern Iraq is rich in oil. So it was no surprise Iraqi troops flowed in last week to crack down on a Kurdish move for independence. That saw oil production reduced to a third of capacity, around 200-thousand barrels a day. And on Monday the battlefield spilt on to markets. Brent Crude almost hit $58 dollars a barrel in early trade. While West Texas Intermediate was up more than 20 cents to just over $52 dollars a barrel. (SOUNDBITE) English SENIOR MARKETS ANALYSTS, OANDA, CRAIG ERLAM SAYING: "I think there's a number of bullish factors with regards to oil right now. The question is how far can it go. Sixty dollars is a very interesting level and should we push through there I think we will maybe start to face a lot of resistance because I'm not sure there is technically the factors in place right now to see 70 dollar oil for example at this moment in time." OPEC has been making progress with its pact to cap oil production and clear excessive global stock to support flagging prices. In a sign of how important the deal is - Saudi Arabia's oil minister made a high profile visit to Iraq on Saturday calling for increased economic cooperation. The two countries are the world's biggest oil producers and are flexing their might to ensure smaller nations stick to the agreement to limit output until at least March 2018. (SOUNDBITE) English SENIOR MARKETS ANALYSTS, OANDA, CRAIG ERLAM SAYING: "They've currently agreed to cut output by one point eight million barrels a day. I wouldn't be surprised to see that halved or the amount of time that's extended by to be very short." The Middle East isn't the only area where production has dropped. The number of U.S. drilling rigs has declined for the third week in a row. Add to that, China and India's insatiable thirst for oil. September saw them import near record levels.