Oil jumps on U.S. killing of Iranian general
Crude prices see 3 percent lift after attack kills military leader, escalates tensions in major oil export artery
Crude prices jumped 3 percent Friday in the aftermath of the United States’ targeted killing of one of Iran’s top military leaders, escalating tensions in a long-running conflict in the center of a vital oilproducing region.
About 20 percent of the world’s oil moves through the Strait of Hormuz, a narrow passage that runs along the coast of Iran on its way to the Persian Gulf. Oil settled Friday in New York at $63.05 a barrel, the highest level since May.
The focus now switches to Iran’s response and whether it goes back to seizing oil tankers in the Strait of Hormuz — the main artery of the Middle East’s oil exports — turns to stronger cyber attacks against U.S. targets or resorts to more deadly attacks, which would push the conflict closer to war, said Joe Barnes, a foreign policy expert and fellow at Rice University’s Baker Institute
for Public Policy. Barnes said that Iran at first would likely respond through proxies, such as the militant Islamist group Hezbollah.
“But there’s lots of room for miscalculation on both sides,” Barnes said, “and the markets are going to be wary until this is all resolved.”
Oil markets also jumped after missile attacks in September by Iran-backed forces on
Saudi Arabia’s largest oil-processing facilities in Abqaiq. But within two weeks, crude prices reverted to their pre-attack levels.
When it comes to global oil supply and demand, governments and producers try to keep the oil flowing even when there’s conflict all around, said Paul Sankey, an energy analyst with Mizuho Securities, a Japanese investment bank. “Typically, however much the instability, the oil keeps pumping because of the money.”
‘Tantamount to war’
But this is potentially an atypical situation, given the recent events, particularly the attack on the Saudi oil processing facilities.
“This is an unfolding situation that is tantamount to war,” Sankey said. “Markets are rightly on high alert.”
Caught in the middle is Iraq, where the U.S. drone attacks took place. Iraq is producing oil near a record of almost 5 million barrels a day, making Iraq the world’s fourth-largest producer, albeit well behind the United States, Russia and Saudi Arabia.
U.S. energy companies working in Iraq are preparing for heightened risks, but they’re staying mum on their plans. Exxon Mobil said its Iraqi production is continuing unabated, declining additional comment outside of a prepared statement.
“We are closely monitoring the situation,” said spokesman Todd Spitler. “Exxon Mobil has programs and measures in place to provide security to protect its people, operations and facilities. We are committed to ensuring the safety of our employees and contractors at all of our facilities around the world.”
The British energy major BP and top oilfield services firms Schlumberger, Halliburton and Baker Hughes — all of whom operate in Iraq — declined comment Friday.
Part of the reason oil prices didn’t spike Friday is because the U.S. and other countries outside the Middle East are producing so much oil. U.S. oil production and exports are at all-time highs.
The nation’s stockpiles of commercial crude oil plunged by 11.5 million barrels last week thanks to record crude exports. The U.S. exported nearly 4.5 million barrels of crude per day last week, the Energy Department reported, even as concerns of a widening conflict brewed in the Middle East.
More oil, fewer rigs
The U.S. is churning out an estimated record high of 12.9 million barrels of crude oil per day and exporting — at least last week — more than one-third of those supplies, the Energy Department said.
At the same time, the number of rigs drilling for oil and gas in the United States fell by nine this week, pushing the overall rig count below 800, Houston oil field services company Baker Hughes reported.
With the tally at 796 rigs, the count is the lowest since March 2017, when the industry was recovering from the last oil bust.
Rigs today, however, are able to drill more wells and to deeper depths to produce more oil and gas, allowing the United States to produce record volumes of crude oil and natural gas with fewer rigs.
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