NEW YORK (Pakistan Point News / Sputnik - 08th January, 2020) Oil prices fell about 1 percent in their sharpest drop since the start of 2020 as tensions dissipated on the US-Iran conflict, which sent the market up earlier this week to four-month highs above $70 per barrel.
Brent, the global benchmark for crude, settled down 64 cents, or nearly 1 percent, at $68.27 per barrel on Tuesday. Brent hit $70.75 on Monday, its highest since mid-September.
West Texas Intermediate, benchmark for U.S. crude futures, closed down 57 cents, or also about 1 percent, at $62.70 per barrel. WTI hit $64.72 on Monday, its highest since April.
Much of the oil rally since the start of the New Year was driven by the killing of Iran's top general Qasem Soleimani by the United States via an airstrike outside Iraq's Baghdad airport on Friday.
"The 'pain trade' is not up for oil prices in the near term," Scott Shelton, energy futures broker at the ICAP commodities brokerage in Durham, North Carolina, wrote in a market commentary. "While the outcome of the market could be explosive under the right scenario of Iran retaliation, there is clearly more selling in the market than buying."
While there has been no direct impact from Soleimani's death on oil production and shipment, crude traders priced in a higher element of risk into the market from the potential of an Iranian retaliation. Both Iran and Iraq are both members of the Organization of the Petroleum Exporting Countries, which together with Saudi Arabia, account for about 40 percent of the world's oil production.
Since Soleimani's killing, Iran's Supreme Leader Ayatollah Khomeini and US President Donald Trump have exchanged strike threats. Iraqi lawmakers, angered by a US missile firing on their soil, have voted to evict US troops who have been in the country since the 2003 war waged by the Bush administration. The vote led Trump to warn that he might slap sanctions on Baghdad.
However, with Iran keeping the United States guessing on when and where it would retaliate, analysts said some of the tensions from the conflicts had eased, prompting oil market participants to price down risk factors.
