Oil cuts earnings in settlement; US fuel inventories rise

* US Gasoline, Distillate Stock – EIA

* Kirkuk-Ceyhan pipeline oil throughput drops to 225,000 bpd – source

* Iraq crisis, US-Iran tensions raise supply concerns

* OPEC leans toward nine-month extension of supply cut – sources (New (KOSDAQ: 160550.KQ – News) in full, updates prices and market activity until settlement, adds comments from Total CEO)

By David Gaffen

NEW YORK, Oct (Shenzhen: 000069.SZ – News) 18 (Reuters) – Oil prices settled slightly higher on Wednesday, with Brent hitting three-week highs and then retreating after a surprise drop in refining rates from the US and an unexpected rise in fuel inventories signaled slower demand among the world’s biggest oil consumer.

Brent crude futures rose 27 cents to $58.15 a barrel, from a three-week high of $58.54 a barrel touched earlier on concerns over ongoing tensions around Iraq and Iran rich in oil.

U.S. West Texas Intermediate (WTI) crude futures settled 16 cents higher at $52.04 a barrel.

U.S. crude inventories fell by 5.7 million barrels last week, the Energy Information Administration said, beating analysts’ expectations.

Refineries reduced activity as the fall maintenance season began, and refining rates fell 4.7 percentage points to 84.5% of total capacity, the lowest seasonal output rate since 2011.

Gasoline and diesel stocks rose, rekindling concerns about high inventories in a period of slower demand.

“A pullback in refinery utilization rates has occurred as refineries undergo seasonal maintenance,” said Anthony Headrick, energy market analyst at CHS Hedging LLC in Inver Grove Heights, Minn. “It includes refined products and a pullback in refined product demand lends weight to the energy complex.”

Tensions in the Middle East supported oil prices. Kurdistan’s oil exports from Iraq have more than halved as the Iraqi army retook some large fields from Kurdistan’s Peshmerga forces.

“It remains to be seen whether the Kurds, having withdrawn from the region they claim to be entitled to, will allow crude oil to be transported through pipelines through their territory to the Turkish Mediterranean port of Ceyhan,” said analysts at Commerzbank (Xetra: CBK100 – news).

Another notable Middle East threat to oil supplies is the ongoing dispute between the US and Iran. US President Donald Trump last week refused to certify Iran’s compliance with a nuclear deal, giving Congress 60 days to decide on further measures.

During the previous round of sanctions against Iran, 1 million barrels per day of oil were cut from global markets.

Ahead of OPEC’s next official meeting, sources told Reuters that its members were leaning toward extending the oil supply cut deal with Russia and other producers. Three OPEC sources said the barriers were likely to remain in place until the end of 2018; a fourth said an extension of six to nine months would be needed.

Executives in London noted that the recent rise in oil prices has spurred hedging activity among US shale producers, which could signal a rise in output in 2018. That would further complicate OPEC’s price plans constantly higher.

“Our US peers are expecting like crazy at $56 a barrel, so we will see another wave of investment in US shale, no doubt,” said Patrick Pouyanne, CEO of oil major Total (LSE: 524773.L – news). Small and mid-sized U.S. producers are ahead of the usual pace of coverage, which could imply higher output, analysts said.

(Additional reporting by Karolin Schaps in Amsterdam and Henning Gloystein in Singapore; Editing by Chris Reese, Marguerita Choy and David Gregorio)