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Oil jumps on supply concerns after US kills Iranian general

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  • Some analysts think Iran may resume harassment of commercial shipping in the Gulf.

Oil prices jumped nearly $3 on Friday after a US air strike in Baghdad killed the head of Iran’s elite Quds Force, sparking concerns for escalation of regional tensions and disruption of crude supplies.

Brent crude hit $69.16 a barrel, its highest since September 17, before easing to $68.54, up $2.29 or 3.4%, by 9.47am GMT. West Texas Intermediate (WTI) crude was up $2.10 or 3.4% at $63.28 a barrel, having earlier spiked to $63.84 a barrel, its highest since May 1.

An air strike at the Baghdad Airport early on Friday killed Major-Gen Qassem Soleimani, the architect of Iran’s spreading military influence in the Middle East and a hero among many Iranians and Shi’ites in the region.

Iran’s Supreme Leader Ayatollah Ali Khamenei said harsh revenge awaited the “criminals” who killed Soleimani.

“We expect moderate to low-level clashes to last for at least a month and likely be confined to Iraq,” Eurasia’s Iran analyst, Henry Rome said. “Iran will also likely resume harassment of commercial shipping in the Gulf and may launch military exercises to temporarily disrupt shipping.” 

On Friday, the US embassy in Baghdad urged all citizens to depart Iraq immediately due to heightened tensions.

“With further escalation remaining a distinct possibility, we could see markets retain at least some risk premium,” JBC Energy, an oil and gas research firm said in a note.

Iraq, the second largest producer among oil cartel Opec, exports about 3.4-million barrels per day (bpd) of crude.

In Europe on Friday, Belarus also said Russia had halted oil supplies to its refineries.

ALSO ON ZIMVOICE:  US kills top Iranian commander Qassem Soleimani in Baghdad air strike

Oil prices were also lifted by China’s central bank saying on Wednesday it was cutting the amount of cash that banks must hold in reserve, releasing about 800-billion yuan ($115bn) in funds to shore up the slowing economy. This came shortly after data showed China’s production continued to grow at a solid pace and business confidence shot up.

“Oil prices still have room for further upside as many analysts are still having to upgrade their demand forecasts to include a rather calm period on the trade front,” Moya said, referring to signs of a thaw in trade relations between China and the US.

  • Reuters

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