Oil rises above $70 amid US, Iran’s face-off

The Punch - - FRONT PAGE - Femi Asu with agency re­port

Oil prices sur­passed $70 per bar­rel on Mon­day for the first time in more than three months as the United States warned of in­creased threats to en­ergy fa­cil­i­ties in the Mid­dle East af­ter the as­sas­si­na­tion of an Ira­nian gen­eral, Qassem Soleimani, last week.

The in­ter­na­tional oil bench­mark, Brent crude, jumped 1.5 per cent to as high as $70.74 per bar­rel, its high­est price since Septem­ber, be­fore eas­ing to $69.17 per bar­rel as of 5.10pm Nige­rian time.

The 2020 bud­get, which was signed by the Pres­i­dent, Ma­jor Gen­eral Muham­madu Buhari (retd.) in De­cem­ber, was based on oil pro­duc­tion of 2.18 mil­lion bpd with an oil price bench­mark of $57 per bar­rel.

Brent, against which Nige­ria’s oil is priced, has climbed more than five per cent since a US air strike killed Soleimani in Iraq on Fri­day.

The lat­est gains fol­lowed a week­end of threats be­tween Wash­ing­ton and Tehran, bring­ing the pair closer to con­flict and rais­ing ten­sions through­out the Mid­dle East, ac­cord­ing to Fi­nan­cial Times.

Crude oil pre­vi­ously traded above $70 per bar­rel in Septem­ber 2019 af­ter drone strikes, which the US blamed on Iran, tem­po­rar­ily knocked out half of Saudi Ara­bia’s oil pro­duc­tion.

Soleimani was the head of the Ira­nian Revo­lu­tion­ary Guard’s over­seas forces and con­trolled the regime’s ex­ten­sive in­flu­ence across le­banon, iraq, Syria and Ye­men.

The US State Depart­ment warned on Sun­day that there was an in­creased risk of at­tacks on oil fa­cil­i­ties and other tar­gets in Saudi Ara­bia, amid wide­spread ex­pec­ta­tions iran would re­tal­i­ate for the killing of Soleimani.

Fol­low­ing the as­sas­si­na­tion, iran said it would no longer abide by any of its com­mit­ments to the 2015 nu­clear ac­cord it signed with world pow­ers.

The price of West Texas In­ter­me­di­ate, the US crude oil marker, strength­ened on Mon­day by 1.7 per cent to a high of $64.72, be­fore eas­ing to $63.85 by lunchtime in Lon­don.

Oil prices will “likely rise much fur­ther if iran re­tal­i­ates, ei­ther by at­tack­ing Saudi oil fa­cil­i­ties as it did in Septem­ber, or at­tempt­ing to block the Strait of Hor­muz, through which 20 per cent of global oil sup­ply is trans­ported”, said Michael Pearce, se­nior US econ­o­mist at re­search group Cap­i­tal Eco­nom­ics.

Mar­ket an­a­lysts at Gold­man Sachs and UBS have cast doubt on whether oil prices will con­tinue to rally be­yond $70 a bar­rel be­cause of strong pro­duc­tion from out­side the Mid­dle East.

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