AMSTERDAM, Oct 18 (Reuters) - Brent oil prices rose to a three-week high on Wednesday as weekly US crude inventories are expected to have fallen steeply and geopolitical tensions around oil-rich Iraq and Iran raised risk premiums. USA light, sweet crude was 25 cents higher at $52.12. Brent crude climbed 1.2 percent to $57.88 per barrel.
Despite some profit taking on Tuesday, Brent crude futures, the worldwide benchmark for oil prices, were still at $57.79 at 0148 GMT, 2.5 percent higher than last Friday's settlement - and nearly a third above mid-year levels.
MSCI's broadest index of Asia-Pacific shares outside Japan gained for a fifth day running to its highest level since late 2007.
While Iraq's government is clashing with Kurdish forces in the north of the OPEC nation, raising the prospect of output disruptions in the region, both sides have an incentive to keep oil flowing due to low production costs and "high revenue" available per barrel, according to Goldman Sachs. The fighting in one of Iraq's main oil-producing areas helped to restore a risk premium on oil prices, though officials said that oil fields in the region were operating normally.
Along with these political developments, oil prices are also supported from the ongoing supply cuts to OPEC.
In addition, the conflict in Iraq has shocked markets as it adds to growing strains between the United States and Iran. President Donald Trump last week refused to certify Iran's compliance with a 2015 worldwide agreement to curb the Islamic Republic's nuclear program in exchange for economic sanctions relief.
The other geopolitical risk helping crude prices is the possibility the USA will impose fresh sanctions on Iran, limiting its oil export capacity.
"These issues (Iraq and Iran) remind us oil and geopolitics are very much inter-linked and it will remain so... oil security remains a critical issue for all the countries", Fatih Birol, the executive director of the International Energy Agency said in a statement.
During the previous round of sanctions against Iran, about 1 million bbl/dd of oil was cut from global markets.
The rate of compliance between OPEC and other participating countries was about 86%, reported Birol. It may take time to break above; meanwhile, crude oil prices could travel between $50 to $52.30 levels.
Oil tanker is seen at sunset anchored off the Fos-Lavera oil hub near Marseille, France, October 5, 2017.
The euro traded at $1.1782, slightly down from the previous day.
Initial estimates Tuesday from the American Petroleum Institute, an industry group, showed a 7.1 million barrel decrease in crude supplies last week.