Sun, Jan 05, 2020 - Page 14 News List

Oil soars after airstrike stokes fear of US-Iran conflict

Bloomberg

Oil on Friday surged toward a three-and-a-half-month high as attention turned to Iran’s threatened retaliation for a US airstrike that killed the Islamic Republic’s top general.

Brent futures rose 3.5 percent, the highest since the attacks on Saudi Arabia’s oil facilities in September last year.

The airstrike near Baghdad International Airport killed major general Qassem Soleimani, commander of the Islamic Revolutionary Guard Corps’ Quds Force.

Prices eased somewhat as swelling US gasoline and diesel inventories offset the biggest crude decline since June last year.

The US Energy Information Administration also reported record-high crude exports, which pulled Gulf Coast stocks down by the most ever. Stockpiles in the region often decline at year-end as companies manage tax exposure.

The agency’s report could not have pushed prices up more than what the Middle East attacks triggered, said Rob Thummel, managing director and portfolio manager at Tortoise, a Kansas-based firm that oversees more than US$21 billion in assets. “From here on the market will be watching for disruptions to global supply.”

The rally also drew selling from oil producers looking to lock in higher prices, something that typically happens in the first quarter, a person familiar with the matter said.

Several million barrels were sold for specific contracts, as well as in time spreads, the person said.

Brent crude for March settlement rose US$2.35 to US$68.60 per barrel, after rising as much 4.9 percent earlier. The global benchmark’s bullish options bias was the biggest since early November, while the contract for this December was at the widest premium to December next year since October 2018.

West Texas Intermediate for delivery next month added US$1.87 to settle at US$63.05 per barrel, after advancing as much as 4.8 percent.

While no oil installations or production were affected, targeting one of Iran’s most powerful generals ratchets up tension between Washington and Tehran, heightening fears of an armed confrontation that could pull in other countries.

Still, the rally could just as easily subside. While prices initially soared after the attack on Saudi Arabia’s Abqaiq processing facility in September, crude then retreated in another sign that the market is concerned more with a surplus than supply shortages.

OPEC is sitting on vast amounts of spare capacity after reducing supplies for most of the past three years. Consuming countries from the US to China control millions of barrels stored in strategic petroleum reserves that can be deployed to offset any shortage.

In the biggest sign of the oil market’s transformation after the shale boom, the US reported its first months as a net exporter of petroleum, including crude and refined oil products, late last year for the first time in about 75 years.

In October last year, the US exported a net 389,000 barrels per day, compared with net imports of close to 9 million barrels per day a decade or so earlier.

In other commodities trading, wholesale gasoline rose US$0.05 to US$1.75 per gallon and heating oil climbed US$0.04 to US$2.06 per gallon, while natural gas rose US$0.01 to US$2.13 per 1,000 cubic feet.

The price of gold, which investors buy in times of uncertainty as a safe haven of value, rose US$24.70, or 1.6 percent, to US$1,549.20 per ounce, near a six-year high.

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