Oil extends year's biggest rally as Iraqi clash curbs exports

Oil extended its biggest rally of the year as a clash between Iraq and its Kurdish region curtailed exports, while fears over a fallout from the banking crisis receded.

West Texas Intermediate futures rose as much as one per cent, after jumping above 5 per cent on Monday in the steepest surge since October. A legal dispute between Iraq, its semi-autonomous region of Kurdistan and Turkey have halted around 400,000 barrels a day of flows from Ceyhan port. Meanwhile, optimism that the worst of the banking turmoil may be over is driving up broader markets.

“Speculators drove the selloff and now they might be forced to support the recovery,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank. “The Iraq dispute has given support to prices, but it's ultimately helped push a ball that was already rolling. Sentiment in the market has been improving as the banking crisis fades.”