SINGAPORE- Oil prices shot more than 2 percent higher on Monday, with Brent rising above $70 a barrel, after US President Donald Trump issued a threat to impose sanctions on Iraq amid escalating tensions with Iran in the Middle East.
Brent crude futures soared to a high of $70.27 a barrel, up $1.67, or 2.4 percent, from Friday’s settlement.
US West Texas Intermediate CLc1 crude was at $64.39 a barrel, up $1.34, or 2.1 percent, after touching $64.44 earlier, the highest since April.
The gains extended Friday’s more-than-3 percent surge after a US air strike in Iraq killed top Iranian commander Qassem Soleimani on Friday. The killing has heightened concerns of a widening Middle East conflict that could disrupt oil supplies from a region that accounts for nearly half of the world’s oil production.
On Sunday President Trump threatened to impose sanctions on Iraq, the second largest producer among the Organization of the Petroleum Exporting Countries (OPEC), if US troops were forced to withdraw from the country. Baghdad earlier called on American and other foreign troops to leave Iraq.
Trump also said that the United States will retaliate against Iran if Tehran were to strike back after the killing.
The incident “will trigger a long cycle of regional escalation with significant risks to US assets and Mideast energy infrastructure that nevertheless stop short of war,” Eurasia Group analyst Ayham Kamel said in a note.
“But the risk of limited conflict is real. It would include substantial Iranian attacks on Gulf energy targets and direct naval clashes between the US and Iran.”
The consultancy expects oil prices in 2020 to range from $65 to $75 a barrel, based on rising risks to oil infrastructure in the region.
Meanwhile Capital Economics analyst Caroline Bain said: “Friday’s incident has all but removed the possibility of a lifting of Iranian sanctions, a large downside risk to our oil price forecast.”
“Regardless of geopolitical events, we expect constrained supply growth and a modest pick-up in demand to push oil prices higher in 2020,” she added in a note.
US citizens working for foreign oil companies in the southern Iraqi city of Basra were leaving the country on Friday, the oil ministry said, after a US air strike killed a top Iranian commander in Iraq.
Hours after the killing of Iranian Quds Force leader Qassem Soleimani and Iraqi militia commander Abu Mahdi al-Muhandis, who was with him, the US embassy in Baghdad urged all its citizens to leave Iraq immediately.
Iraqi officials said the evacuation would not affect oil operations, production or exports from the country, the second-biggest producer in the Organization of the Petroleum Exporting Countries with output of about 4.62 million barrels per day (bpd), according to a Reuters survey of OPEC output.
Oil company sources told Reuters earlier on Friday that dozens of foreign workers were expected to fly out of the country. A Reuters witness saw a number of foreigners, including US citizens, queuing at Basra airport and described the atmosphere as relaxed.
Some were travelling to Dubai on airline FlyDubai and others were checking in at the Qatar Airways counter.
A spokesman for BP, which operates the giant Rumaila oil field near Basra, declined to comment. Rumaila produced around 1.5 million bpd as recently as April.
Italian energy group Eni said the Zubair oil field, which produced around 475,000 bpd in 2018, was “proceeding regularly”, adding it was closely monitoring the situation.
US major Exxon Mobil declined to comment on whether it was evacuating staff but said production “continues normally” at its West Qurna 1 oil concession in the south of the country near the Iranian border.
“We continue to watch the situation closely,” a spokeswoman said.
Exxon removed around 60 foreign staff from West Qurna last May after attacks near its oil facilities. The employees returned about two weeks later after the government agreed to provide additional security. – Reuters
