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Oil prices shed gains as alarm over Iran rocket strike fades - for now

Published 01/08/2020, 05:01 AM
Updated 01/08/2020, 05:01 AM
Oil prices shed gains as alarm over Iran rocket strike fades - for now

By Aaron Sheldrick and Julia Payne

TOKYO/LONDON (Reuters) - Oil prices were up on Wednesday but well below peaks hit in frenzied early trading after a rocket attack by Iran on American forces in Iraq raised the specter of a spiraling Middle East conflict and disruption to crude flows.

Prices gave up most of their early gains as analysts said market tension could ease as long as oil production facilities remain unaffected by attacks. Tweets by U.S. President Donald Trump and Iran's foreign minister also appeared to signal a period of calm - for now.

Brent crude futures were up 26 cents, or 0.38%, to $68.53 by around 0908 GMT, after earlier rising to their highest level since mid-September 2019 at $71.75.

West Texas Intermediate crude futures gained 10 cents, or 0.16%, to $62.80 a barrel. It earlier hit $65.85, the highest since late April last year.

Iran's missile attack on U.S.-led forces in Iraq came early on Wednesday, hours after the funeral of Qassem Soleimani, the commander of the country's elite Quds Force killed in a U.S. drone stroke on Jan. 3.

Tehran fired more than a dozen ballistic missiles from Iranian territory against at least two Iraqi military bases hosting U.S.-led coalition personnel, the U.S. military said on Tuesday. Stock, currency and gold markets were also roiled by the attacks. [MKTS/GLOB]

Trump said in a tweet that an assessment of casualties and damage from the strikes was under way and that he would make a statement on Wednesday morning U.S. time. "All is well!" Trump said in the Twitter post.

(GRAPHIC: Iran fires missiles at U.S bases in Iraq - https://graphics.reuters.com/IRQ-SECURITY/0100B4VF2PF/IRAQ-SECURITY.jpg)

'TEMPORARY PHENOMENON'?

Early indications suggested no U.S. casualties, one source told Reuters, although other officials declined to comment. Iranian state television said 80 "American terrorists" had been killed and U.S. helicopters and military equipment damaged.

Iraq, Germany, Denmark and Norway said none of their troops were killed or injured.

Executives and analysts said oil markets remained focused for now on the targets in the Wednesday attack being military, rather than oil industry facilities.

"I think the surge in oil markets will be a temporary phenomenon ... U.S. shale oil players will boost output if oil prices remain stronger," said Toshiaki Kitamura, the chairman of Japanese oil and gas producer Inpex Corp, speaking to Reuters at an industry gathering.

Still, he said, "There is no real reason to push down oil prices, either. So I believe oil prices will likely hover between $60-70/barrel this year."

In a research note, Goldman Sachs (NYSE:GS) maintained its three-month view for U.S. oil at $63 a barrel.

"The recent rally in oil prices is unsustainable without actual supply disruption," the bank said.

OPEC RESPONSE

The Organization of the Petroleum Exporting Countries will respond to any possible oil shortages if necessary but it also has "limitations", the United Arab Emirates energy minister said on Wednesday.

Suhail al-Mazrouei also said he sees no immediate risk of supplies through the important Strait of Hormuz being blocked.

(GRAPHIC: Oil, gold prices retreat after initial surge following Iran's attacks on U.S. forces in Iraq - https://fingfx.thomsonreuters.com/gfx/ce/7/7953/7935/MarketReaxJan82020.png)

In Wednesday's attack, Iranian news agency Mehr said Iran's Islamic Revolutionary Guard Corps had targeted the bases in Iraq that hosted U.S. forces. Tehran had vowed retaliation for the killing of military commander Soleimani.

"Iran took and concluded proportionate measures in self-defense," Iranian Foreign Minister Jawad Zarif said on Twitter.

"We do not seek escalation or war, but will defend ourselves against any aggression."

Latest comments

72 is the resistant, oil must retrace to have another run up
The title makes no sense. has tension really receded? The missile attack happened less than 24hrs ago
They have been saying that all week like people, we took out the terror capital of the world's leader equivalent to mike pence in rank. They aren't going quietly in two days.
Iran needs a regime change.
What needs changed here is for Trump to learn the Confucius Values... that is... Don't do on to others what you don't want others to do on to you. And view the world as One Big Family under one sky. That is why China can be a Lion because they understand this core values from Confucius.
Peace on Earth Goodwill to All Mankind
war is not a sulution
Tomorrow is going to be a crazy day in the markets
I'm not so sure...
Who cares of Iran and Iraq except traders...I mean weak traders?
Trust me, tomorrow, after a little slow morning, the market will rise like there is no tomorrow.
Hope no one got hurt.
OMG
nice
good
Tired of foreignors *******take them out end it smartest thing we can donis wake ip the world since everyone looks at us a world police
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