The crude oil prices were also supported by worries over renewed US sanctions against Iran as on Friday, President Donald Trump refused to certify to Congress that Tehran is complying with the 2015 Iran nuclear agreement. This is months after of range-bound trading during which OPEC-led supply cuts buoyed crude prices but rising USA output capped markets.
Global benchmark Brent crude futures, the benchmark for oil prices outside the USA, eased 0.47% to $56.67 a barrel.
During the previous round of sanctions against Iran, some 1 million bpd of oil was cut from global markets. "If they are, we expect that several hundred thousand barrels of Iranian exports would be immediately at risk", analysts at Goldman Sachs said in a research note published Tuesday.
After the news of the Iraqi forces' engagement in Kirkuk with Kurdish forces on October 16, 2017, the Brent-WTI spread expanded $0.28.
Crude flows through the 600,000 barrel-per-day (bpd) Kurdish pipeline to the Turkish port of Ceyhan have dropped off sharply to around 225,000 bpd, a shipping source told Reuters.
SINGAPORE, Oct 17 (Reuters) - A risk premium has returned to oil markets, boosting global prices as escalating fighting in Iraq threatens supplies while political tensions loom between the United States and Iran.More news: Isis 'White Widow' Sally Jones is killed by U.S. drone strike
More news: UK Inflation Highest Since 2012
More news: Mauricio Pochettino hits out at Pep Guardiola's description of Tottenham
Asked about the conflict in Iraq between the government and separatist Kurds and the United States decision to decertify its nuclear deal with Iran, Birol said it is premature to assess the impact of these geopolitical risks on oil markets.
In an otherwise typically quiet Monday market, the price of Crude Oil is up nearly 1.7% since this week's open, as at the time of writing. The drain on the surplus of the five-year average in global crude oil inventories is supported by a production ceiling steered by the Organization of Petroleum Exporting Countries.
The euro slumped 0.25 percent to $1.1792, while the dollar index .DXY added to gains, rising 0.21 percent as investors repositioned following disappointing inflation data on Friday that sent the greenback lower.
US President Donald Trump refused to confirm Iran's compliance over a nuclear deal that has left Congress 60 days to consider implementing new sanctions against the country.
The upbeat forecast for oil demand growth, however, was offset by a rise in OPEC production by 90,000 barrels a day, fueling concerns that OPEC compliance with the deal to curb output is starting to wane.
Initial estimates Tuesday from the American Petroleum Institute, an industry group, showed a 7.1 million barrel decrease in crude supplies last week.