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Rising attack threats between US, Iran over Soleimani killing jump oil price to $70

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Economies like Nigeria, whose mainstay remains oil earnings, are in for gains as global oil prices rose a further two per cent on Monday, pushing Brent above $70 a barrel.

This stemmed from rising attack threats and build up for possible confrontations between US and Iran following last week’s precision drone bombing that eliminated Iranian military commander Qassem Soleimani at Iraqi airport last week Friday evening.

Already tension is high across Middle East as Tehran has vowed to retaliate the killing which Washington described as not for war but ending a terror war regime.

Movements at the global oil markets saw brent crude futures LCOc1 soar to a high of 70.74 dollars a barrel and was at 69.74 dollars at 0940 GMT, up 1.14 dollars, or 1.66 per cent, from Friday’s settlement.

U.S. West Texas Intermediate CLc1 crude was at 63.92 dollars a barrel, up 87 cents, or 1.38 per cent after touching 64.72 dollars the highest since April.

Business Hilights gathered that the gains extended Friday’s more than 3 per cent surge after a U.S. air strike in Iraq killed Iranian military commander Qassem Soleimani on Friday, heightening concerns about an escalation in conflict in the Middle East and the possible impact on oil supplies.

Recall that the region accounts for nearly half of the world’s oil production, while a fifth of the world’s oil shipments pass through the Strait of Hormuz.

Further to the war build up, on Sunday U.S. President Donald Trump threatened to impose sanctions on Iraq, the second largest producer among the Organisation of the Petroleum Exporting Countries (OPEC), if U.S. troops were forced to withdraw from the country.

Baghdad earlier called on U.S. and other foreign troops to leave Iraq in a parliamentary vote which is yet to be ratified by the leadership.

Trump also said that the United States would retaliate in 52 sites against Iran if Tehran were to strike back after the killing.

Goldman Sachs analysts said the current risk premium embedded in Brent monthly price spreads is already elevated and an actual supply disruption is now necessary to sustain current oil prices.

“The precedent set by the Abqaiq attack (on Saudi oil facilities in September 2019) showed that the oil market has significant supply flexibility starting when Brent is at 70 dollars a barrel, even before shale production needs to ramp up, suggesting only moderate upside from here, should an attack on oil assets actually occur,” the bank said.

In the United States, U.S. crude stocks fell by their most since June as exports exceeded 4 million barrels per day for the first time in history, the Energy Information Administration said on Friday.

Elsewhere, bad weather shut all four oil export terminals in eastern Libya on Sunday and the closure could last three days, port sources averred.

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