Oil Prices Up Over $3 on US-Iran Dispute
Oil prices extended gains in the previous session on Friday. This happens as the possibility of a supply disruption grew on intensifying geopolitical conflict in the Middle East.
International benchmark Brent crude futures inched up 3.5% to $68.61 a barrel. It has reached its highest since September 17 at $69.16 earlier.
West Texas Intermediate crude futures added 3.4% to $63.31 a barrel. It previously climbed $63.84 earlier in the session to record its highest since May 1.
The energy commodities complex already received support on Wednesday. It came in the form of the People’s Bank of China (PBOC) decision to ease monetary policy further. The move aimed to boost the country’s weakening economy.
PBOC will cut the reserve requirement ratio for banks by 50 basis points, releasing around CN¥800 billion or $115 billion.
The announcement came after official data showed China’s manufacturing activities rose at a steady rate in December. And business confidence improved amid cooling trade dispute between the world’s two biggest economies.
While the manufacturing PMI slowed to 51.5 last month from 51.8 in November, the figure remained in the expansion area for the fifth straight month.
Oil prices still have room for further upside, as many analysts still have to upgrade their forecasts to include a rather calm period on the trade front, according to analyst Edward Moya.
US President Trump is likely to take a break on being a tariff man until the market gets beyond the presidential election in November, he added.
Trump announced on Tuesday that they will sign the Phase One trade deal at the White House on January 15.
Oil Prices’ Optimism Continue on Potential Disruption to Middle East Supplies
The optimism in oil prices on Friday was mainly encouraged by the latest escalation of tensions between the US and Iran.
Reports revealed that Iranian Major-General Qassem Soleimani, leader of the elite Quds Force, and Iraqi paramilitary commander Abu Mahdi al-Muhandis died after their convoy was struck during a US airstrike at the Baghdad International Airport early on Friday.
Iran’s supreme leader Ayatollah Ali Khamenei said “severe revenge” is awaiting those responsible for the killing of Soleimani.
The supply-side risks remained elevated in the Middle East. And tensions continued to elevate between the US and Iran-backed militia in Iraq, Moya stated.
Iraq exports around 3.4 million barrels per day (BPD) of crude, mostly from the southern Basra port.
Russia has also suspended crude supplies to refineries in Belarus. This comes after the two countries failed to see eye to eye on terms for a 2020 supply agreement.
Meanwhile, the ongoing unrest in the Middle East placed the precious metals market in the green on Friday as well.
Spot gold advanced by 1.3% to $1,549.05 per ounce, while gold futures gained 1.5% to $1,551.55 per ounce.