Oil prices up after Iran attacks two US-Iraqi airbases

Oil prices jumped on Wednesday in Asia after Iran attacked two US-Iraqi airbases in response to a US airstrike that killed a top Iranian general last week, sparking worries of intensifying conflict in the Middle East.

Overnight, the Pentagon said missile strikes were launched from Iran and targeted the Ayn al-Asad base in western Iraq and another facility in Erbil.

US Crude Oil WTI Futures surged 1.3% to $63.53 by 10:27 PM ET (04:27 GMT), while International Brent Oil Futures traded 1.4% higher. Oil prices jumped as much as 5% earlier in the day following the news, but gave up some of their gains later on as Iran’s foreign minister said it had “concluded proportionate measures in self-defense” and is not seeking war.

Supply worries resulting from deepening conflict between the US and Iran were cited as tailwind for oil markets since the beginning of the year as a US airstrike killed general Qassem Soleimani last week. Following the attack, Iran vowed to retaliate and said it was assessing 13 possible ways to inflict a “historic nightmare” on America.’

Meanwhile, the American Petroleum Institute reported that crude stockpiles dropped by 5.9 million barrels for the week ended Jan. 3, compared with a plunge of about 11.5 million barrels reported for the week before.

The Energy Information Administration is expected to report a drop of about 3.6 million barrels when it issues official numbers tomorrow, according to analysts’ forecasts compiled by Investing.com.

While not a directional driver, the US reported better-than-expected data in the non-manufacturing sector overnight.

The ISM Non-Manufacturing PMI Index registered growth in December, with the Composite Index coming in at 55.0 Tuesday, a four-month high, versus the expected 54.5 and 53.9 the previous month.

Developments on the Sino-US trade front also remained as focus. The two nations were reportedly going to sign a phase one trade deal on Jan. 15.

“We will be having a signing ceremony, yes,” US President Donald Trump said before Christmas. “We will ultimately, yes, when we get together. And we’ll be having a quicker signing because we want to get it done. The deal is done, it’s just being translated right now.”

A Chinese trade delegation led by Vice-Premier Liu He will travel to Washington for the signing of the deal, although Chinese President Xi Jinping is not expected to be present, according to South China Morning Post, which cited Chinese state media.