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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Oil Prices Correct Following Iranian Attacks

Iraq oil field

Crude oil prices first spiked and then retreated after newswires reported Iran’s retaliation against the U.S., targeting military bases housing U.S. troops in Iraq.

After their initial spike, however, price retreated, and at the time of writing Brent crude was trading at $67.80 per barrel, with West Texas Intermediate at $62.07 a barrel. As the situation develops more sudden moves in benchmarks are almost a certainty.

Brent and WTI first spiked on Friday, after the United States carried out a drone attack on a convoy including the leader of the Quds force of the Iranian Islamic Revolutionary Guard Corps, General Qassem Soleimani. Iran threatened retaliation and since then, it was only a matter of time before it followed through with its threat.

However, soon after media reported the missile strikes on the Iraq military bases, President Donald Trump tweeted that all was well and the number of casualties and the extent of damage were being assessed. Iranian media, however, claimed the attacks had killed 80 U.S. troops, damaging helicopters and military equipment. Per a Reuters report, the Iranian media supplied no explanation of the source of this information.

A tweet from President Trump, however, seemed sufficient to defuse tension on the oil market, at least temporarily, with prices retreating from their initial highs that followed the Friday assassination. Over the course of the trading session today all sorts of surprises are likely although it’s safe to say the overall movement will be in the upward direction as the markets awaits the U.S. response to the attacks.

Meanwhile, U.S. oil companies rushed to hedge their production at the higher oil prices. According to industry sources that spoke to Bloomberg, many shale producers added more hedges for their production to lock in the higher prices for their output this year and the next.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on January 08 2020 said:
    The reason prices corrected themselves following the Iranian missile attacks on US Air bases in Iraq is because the global oil market is well supplied as a result of a glut which has been augmented by two years of trade war to an estimated 4.0-5.0 million barrels a day (mbd).

    The glut was big enough to undermine OPEC+ production cuts, nullify the impact of geopolitics and outages on oil prices and even absorb the loss of half of Saudi oil production. It is still capable of absorbing attacks on American military bases.

    By informing Iraq of its impending missile attacks, Iran may have intended to reduce any casualties among American troops and thus further escalation knowing full well that the Iraqis would immediately pass the information to the Americans.

    If, however, this is not the case and there were American casualties, then the United States will hit back prompting Iran to retaliate again with retaliations and counter retaliations spiralling into a hot war and oil prices surging to the unknown.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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