For the first time in more than three months, Oil prices surpassed $70 per barrel on Monday as the United States warned of increased threats to energy facilities in the Middle East after the assassination of an Iranian general, Qassem Soleimani, last week.
Brent crude, the international oil benchmark jumped 1.5 per cent to as high as $70.74 per barrel, its highest price since September, before dropping to $69.17 per barrel as of 5.10pm Nigerian time.
Nigeria’s oil is priced against the Brent and the country’s 2020 budget which was signed into law by the President, Muhammadu Buhari is based on oil production of 2.18 million bpd with an oil price benchmark of $57 per barrel.
This recent surge in the price of oil is coming after a weekend of threats between United States and Iran, bringing the pair closer to conflict and raising tensions throughout the Middle East, according to Financial Times.
The last time Crude oil traded above $70 per barrel was in September 2019 after drone strikes, which the US blamed on Iran, temporarily knocked out half of Saudi Arabia’s oil production.
Soleimani was the head of the Iranian Revolutionary Guard’s overseas forces and controlled the regime’s extensive influence across Lebanon, Iraq, Syria and Yemen.
On Sunday, the US State Department warned that there was an increased risk of attacks on oil facilities and other targets in Saudi Arabia, amid widespread expectations Iran would retaliate for the killing of Soleimani.
Iran has said it would no longer abide by any of its commitments to the 2015 nuclear accord it signed with world powers after the assassination.
The price of West Texas Intermediate, the US crude oil marker, strengthened on Monday by 1.7 per cent to a high of $64.72, before easing to $63.85 by lunchtime in London.
Oil prices will “likely rise much further if Iran retaliates, either by attacking Saudi oil facilities as it did in September, or attempting to block the Strait of Hormuz, through which 20 per cent of global oil supply is transported”, said Michael Pearce, senior US economist at research group Capital Economics.
UBS and Goldman Sachs’s market analysts have cast doubt on whether oil prices will continue to rally beyond $70 a barrel because of strong production from outside the Middle East.