Brent crude price jumps after US airstrike in Baghdad

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Brent crude price jumps after US airstrike in Baghdad

A U.S. air strike Friday which killed key Iranian and Iraqi military personnel has raised concerns that escalating Middle East tensions may disrupt oil supplies. The immediate effect saw Brent crude futures jumping nearly $3, their highest since September.

Brent, the international benchmark, hit an intraday high of $69.16 a barrel, its highest since Sept. 17, before easing to $68.21, up $1.96, or 3%, by 0618 GMT.

U.S. West Texas Intermediate (WTI) crude futures were trading up $1.68, or 2.8%, at $62.86 a barrel, having earlier spiked to $63.84 a barrel, the highest since May 1.

“The supply side risks remain elevated in the Middle East and we could see tensions continue to elevate between the U.S. and Iran-backed militia in Iraq,” said Edward Moya, analyst at brokerage OANDA, in an e-mail to Reuters.

“This is more than just bloodying Iran’s nose,” said AxiTrader’s Stephen Innes. “This is an aggressive show of force and an outright provocation that could trigger another Middle East war.”

An air strike at the Baghdad International Airport early on Friday killed seven persons, including Iranian Major-General Qassem Soleimani, head of the elite Quds Force, and Iraqi militia commander Abu Mahdi al-Muhandis.

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Soleimani’s killing marks a dramatic escalation in the regional “shadow war” between Iran and the United States and its allies. Iranian Supreme Leader Ayatollah Ali Khamenei vowed harsh revenge.

“There is an ever present risk that Iraq would be the theatre where the struggle between the U.S. and Iran would play out,” Helima Croft, RBC Capital Markets’ global head of commodity strategy said in a note.

Iraq, the second largest producer among the Organization of the Petroleum Exporting Countries, exports about 3.4 million barrels per day of crude mostly from southern Basra port.

“The surge in oil price just now was primarily driven by news of U.S. air strike killing a high-level general of Iran,” said Margaret Yang, market analyst of CMC Markets.

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 around 800 billion yuan ($115 billion) in funds to shore up the slowing Chinese economy.