Oil steadies around levels prevailing before U.S.-Iran attacks

[January 09, 2020]  By Shadia Nasralla

LONDON (Reuters) - Oil prices steadied on Thursday after the previous session's sharp losses on the back of swelling U.S. crude stocks and easing fears of an escalation in conflict between the United States and Iran.

Prices were hovering around where they stood before the Jan. 3 U.S. drone strike that killed a top Iranian general and prompted an Iranian rocket attack on Iraqi airbases hosting U.S. forces, sending crude to its highest in four months.

Brent crude futures moved up and down in early European trading after a 4.1% fall on Wednesday. By 1021 GMT, Brent was down 1 cent at $65.43 a barrel. West Texas Intermediate was up 2 cents at $59.63 after sliding nearly 5% the previous day.

In comments reported by Iran's Tasnim news agency after Tehran launched its retaliatory missile attacks on U.S. targets in Iraq late on Wednesday, a Revolutionary Guards commander said Iran would take "harsher revenge soon".

Two rockets fell inside Baghdad's heavily fortified Green Zone, which houses government buildings and foreign missions, but caused no casualties, the Iraqi military said.

U.S. President Donald Trump had eased tensions by stepping back from further military action, depressing oil prices and diverting attention back to a surprise build in U.S. crude stockpiles last week.

Crude oil stocks were up 1.2 million barrels in the week ended Jan. 3 at 431.1 million barrels, the Energy Information Administration said on Wednesday.

Analysts in a Reuters poll had expected a drop of 3.6 million barrels.

(Graphic: U.S. petroleum inventories click, https://fingfx.thomsonreuters.com/
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A maze of crude oil pipes and valves pictured during a tour by the Department of Energy at the Strategic Petroleum Reserve in Freeport, Texas, U.S., June 9, 2016. REUTERS/Richard Carson

JPMorgan analysts maintained their forecast for Brent to average $64.50 a barrel this year.

Top oil producers led by Saudi Arabia have agreed to reduce output by as much as 2.1 million barrels per day (bpd) through the first quarter of 2020.

"As geopolitical tensions appear to enter a new equilibrium ... the overall supply conditions in the market tend to favour oil reverting lower," Harry Tchilinguirian, oil strategist at BNP Paribas in London, told the Reuters Global Oil Forum.

"U.S. crude oil production remains at a record 12.9 million bpd ... it is not evident in our opinion that OPEC and its non-OPEC allies will fully implement the incremental supply cuts."

Meanwhile, oil and gas ship owners are bracing to pay a price for U.S.-Iranian tensions in the form of higher insurance bills, which could add hundreds of thousands of dollars to shipping costs that would ultimately be passed on to fuel buyers, mostly in Asia.

(Additional reporting by Aaron Sheldrick in Tokyo; Editing by Jan Harvey and David Goodman)

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