Adedapo Adesanya
By Adedapo Adesanya
Amid global tensions spurred by the spat between the United States and Iran, oil prices are expected to keep trading upward this week especially for Brent Crude. On Monday morning, the oil futures hit $70 per barrel.
As for the West Texas Intermediate (WTI), it traded to its highest point in seven months following the attack last week, hitting the $64 per barrel mark. This would be the first time since April 2019 that the future had reached that level.
Oil prices were already experiencing a good outlook before the news broke out that the United States President, Mr Donald Trump, ordered the assassination of Iranian general, Mr Qassem Soleimani, on Friday morning, increasing pre-existing tension and moved futures up by over 4 percent.
With the new week, further retaliation by the Iran government remains after carrying out attacks in Kenya and Iraq. However, Mr Trump has warned that if Iran retaliates, the US will not hesitate to launch attacks at 52 strategic positions held dearly by Iran.
Crude oil last traded briefly above $70 per barrel in September after attacks which the US blamed on Iran temporarily knocked out half of Saudi Arabia’s oil production, which accounts for at least 5 percent of global production quota.
With the death of General Soleimani, who was the head of the Iranian Revolutionary Guards’ overseas forces and controlled the regime’s extensive influence across Lebanon, Iraq, Syria and Yemen, the US state department warned on Sunday of an increased risk of attacks on oil facilities and other targets in Saudi Arabia, as a statement by Iran.
Oil analysts noted that certain course of actions that may further cause a rise in prices include decisions to attack Saudi oil facilities as it did in September, or attempting to block the Strait of Hormuz, through which 20 percent of global oil supply is transported.
But there is a possibility that the market may fall if Iran does not react immediately as traders at this point may no longer wait for a reaction and trade off the commodity.
Hours after the US drone strike on Friday, Iran responded by firing missiles near US Embassy in Iraq. The embassy was initially attacked by pro-Iran protesters and the late military chief was blamed by Mr Trump for this.
The news of the US-China trade deal is also a factor that can support prices this week as the date agreed to sign the phase one of the deal push closer, especially with new developments China’s trade delegation led by Vice Premier, Liu He plans to travel to Washington for four days from January 13 for the signing of the phase one deal that would ease the 18 months trade war between the world’s two largest economies.
With these major pointers this new week also backed by oil cuts from the Organisation of the Petroleum Exporting Countries (OPEC) alliance, Brent Crude is expected to maintain a price higher than $68 while the WTI future is expected not to go below the $63 mark.
