OIL UP- Brent Blows Past $70 on U.S.-Iran Crisis

Oil prices remained in bull territory on Monday, with global crude benchmark Brent piercing the key psychological $70-per-barrel mark, before coming off that peak, as Washington and Tehran exchanged strike threats after the U.S. killing of an Iranian general.

West Texas Intermediate, the U.S. crude benchmark, settled up 22 cents, or 0.3%, at $63.27 per barrel. WTI hit an eight-month high of $64.72 earlier.

Brent, the global oil benchmark, settled up 31 cents, or 0.5%, at $68.91. It surged to $70.75 earlier. The last time Brent traded above $70 was in the aftermath of the September drones attacks on Saudi Arabia’s Abqaiq oil processing complex, which the United States accused Iran of masterminding.

“The situation today is very different from the attack on Abqaiq,” said Olivier Jakob at oil risk consultancy PetroMatrix in Zug, Switzerland. “After the attack on Saudi Arabia, both the U.S. and Saudi Arabia rapidly toned down instead of escalating. The opposite is true today, with both Iran claiming revenge and President (Donald) Trump threatening to blow Iran apart.”

Oil prices closed 2019 with their largest gains in three years. Brent rose 24% on the year while West Texas Intermediate gained 34%.

A day after trading for 2020 began, the rally reached new heights as a U.S. drone attack near Baghdad airport killed Qassem Soleimani, commander of Iran’s Revolutionary Guards’ Quds force.

Since Soleimani's killing, Iran has said it was abandoning limits to uranium enrichment, a step required for making nuclear weapons. Iraq’s parliament, meanwhile, has voted to expel U.S. forces from the country, prompting Trump to threaten Baghdad with sanctions. Rockets also fell all over Iraq on Monday, with no human casualties reported. Separately, fighting has also broken out in Libya.

Tehran and Washington have exchanged strike threats, with Iran’s Supreme Leader Ayatollah Ali Khameini vowing “harsh revenge” and Trump saying he has identified 52 targets in Iran, including sites of cultural prominence, in a counter attack that may be “disproportionate.”

Iran, Iraq and Libya, along with Saudi Arabia, are among the largest oil producers in the Middle East, which accounts for 40% of the world’s crude supply. Oil traders fear a breakout of war will seriously hamper movement of crude from the region to the rest of the world.

Middle East crude supplies are already expected to be tighter this year than in 2018 due to sharper production cut pledges by OPEC and its top ally Russia under the OPEC+ initiative.