Oil Prices Drop as Tensions De-escalate in Middle East

Daniel Fowler
January 11, 2020

Crude oil prices fell further Thursday after sharp losses in the day-earlier session, as the market shifted its focus towards rising USA crude stocks and away from fears of an imminent escalation of conflict between the US and Iran, Kallanish Energy reports.

These events had pushed crude to its highest in four months.

Oil is now below where it was before a US drone strike killed a top Iranian general on January 3, with Iran responding with a ballistic missile attack on Iraqi air bases hosting USA forces this week that left no casualties.

Prices of oil decreased on Friday as investors' worries over potential worldwide supply disruption eased as the president of the United States Donald Trump commented over the missile attack of Iran against USA forces in Iraq.

However, markets were still eyeing the longer-term risks of conflict, and prices were briefly supported on Friday by new US sanctions on Iran in retaliation for its missile attack on USA forces in Iraq this week.

Oil slipped further towards $65 a barrel on Friday as tensions in the Middle East over Iran eased for now and investors focused on rising USA inventories and other signs of ample supply.

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Bharara also said Americans who disagreed with President Donald Trump's actions are not "unpatriotic or lovers of terrorists". No congressional Democrat has mourned Soleimani, whom U.S. officials have blamed for the deaths of hundreds of Americans.

As for prices, the Energy official said it was "unlikely" for global oil prices to reach beyond $70 per barrel.

"The impact on oil prices will depend on (the) extent of supply disruption versus available spare capacity, global oil inventories and reaction to oil price from USA producers", the bank said in a commodities research note.

JPMorgan analysts maintained their forecast for Brent to average US$64.50 a barrel this year.

Top oil producers led by Saudi Arabia have agreed to reduce output by as much as 2.1 million barrels per day through the first quarter of 2020.

Oil futures traded little changed in the immediate wake of the release of the U.S. December employment report, then moved lower. By 1322 GMT Brent was down 5 cents at $65.39 a barrel. West Texas Intermediate was down 37 cents, at $59.24/Bbl, after sliding almost 5% the previous day.

On the Multi Commodity Exchange, crude oil delivery for February contracts slipped Rs 37, or 0.87 percent, to Rs 4,206 per barrel with a business turnover of 3,660 lots.

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