JOHANNESBURG - Brent surged above $60 (R846) a barrel for the first time in more than two years amid enthusiasm that Opec may extend its supply-restraint deal and indications that the situation between Iraq and the Kurds remains fragile.

The global benchmark jumped to levels last seen in July 2015 and crude in New York closed near an eight-month high.

Saudi Arabian Crown Prince Mohammed bin Salman last week backed the extension of production cuts by Opec beyond March, fuelling optimism.

At the same time, crude flows from Iraq to Ceyhan, Turkey, remain below normal levels and a US spokesperson said the Kurds and Iraqis haven’t reached an official cease-fire.

Extension

“The Saudis keep pressing for an extension of the output-cut deal through next year, so the market is feeding off that, and we are seeing signs of tightening,” John Kilduff, a partner at Again Capital, a New York-based hedge fund, said. “The Iraq-Kurd situation is also getting the attention of the market. The volumes are down out of Ceyhan. This is not resolving itself as quickly as it looked like it might have been.”

Brent for December settlement jumped $1.14 to end the session at $60.44 a barrel on the London-based ICE Futures Europe exchange.

Prices were up 4.7percent last week.

The global benchmark traded at a premium of $6.54 to West Texas Intermediate (WTI).

WTI for December delivery added $1.26 to settle at $53.90 a barrel on the New York Mercantile Exchange. Total volume traded was near the 100-day average.

“This seems to be a carry-forward of this bullish momentum we’ve been seeing. The overall consensus towards crude is a little more positive,” Ashley Petersen, lead oil analyst at Stratas Advisors in New York, said.

Both the global benchmark and its US counterpart have rallied in October amid increasing belief that Opec will agree to cut output later into next year, helping to work down global inventories.

Statoil’s chief executive Eldar Saetre said that he continues to see strong demand and the oil market is “definitely balancing".

“People are starting to price in the OECD inventories moving back towards normalised levels into later 2018,” Brad Hunnewell, a senior equity analyst at Rockefeller & Company, said.

WTI rallied immediately after US Army Colonel Ryan Dillon, a spokesperson for Operation Inherent Resolve, the US-led coalition against the Islamic State, said on Friday that he “incorrectly” said in an interview with Kurdish Rudaw news agency that there was a cease-fire between Iraqi and Kurdish forces.

Iraqi Prime Minister Haider Al-Abadi suspended operations by federal forces for 24 hours in disputed areas to allow a joint Iraqi and Kurdish team to deploy forces, Sumaria TV reported.

The Standard & Poor’s 500 Energy Index was up by the most in almost two weeks, with Cabot Oil & Gas Corporation, EQT Corporation and Chesapeake Energy Corporation leading the pack.

As earnings season kicked off, Exxon Mobil Corporation and Chevron Corporation reported lower production compared with third-quarter estimates. Total posted the highest earnings from pumping oil and gas in more than two years, and its chief executive Patrick Pouyanne said the imbalance between crude supply and demand is finally dissipating.

“You’ve had a couple of the major international oil companies reporting production results that have been perhaps modestly below street expectations,” Hunnewell said. "That’s also lending support to oil’s rally," he said. 

- BLOOMBERG