March ICE Brent hits $70/b as US-Iran tensions escalate

Singapore — Oil futures continued to rally Monday morning in Asia, with the March ICE Brent contract climbing above $70/b as geopolitical tensions between the US and Iran escalated.

At 10:08 am Singapore time (0208 GMT), front-month March ICE Brent crude futures were up $1.62/b (2.36%) from Friday's settle at $70.22/b, while the NYMEX February light sweet crude contract was $1.34/b (2.13%) higher at $64.39/b.

The latest gains followed a $2.35/b rise in Brent futures Friday, and a $1.87/b rise in NYMEX crude futures.

US President Donald Trump in a series of tweets over the weekend threatened further military action against Iran, should Tehran strike back as promised in response to the US killing of Iranian General Qassem Soleimani.

"These Media Posts will serve as notification to the United States Congress that should Iran strike any U.S. person or target, the United States will quickly & fully strike back, & perhaps in a disproportionate manner. Such legal notice is not required, but is given nevertheless!" Trump tweeted Sunday afternoon.

That followed a threat late Saturday by Trump that the US would target 52 Iranian sites if Tehran retaliates.

Iran has promised to retaliate against the US, or its interests, in response to the killing of Soleimani in a US air strike in Baghdad Thursday.

The US State Department warned early Sunday of heightened risks of attacks around oil facilities in Saudi Arabia's Eastern Province, and urged US citizens in Saudi Arabia to "immediately review precautions to take in the event of an attack."

Also Sunday, the Iraqi parliament voted to expel the US military from the country. Any law would not take effect until after ratification and one- year notice. Additionally, Iraq will aim to keep crude production flowing with or without US military presence.

Trump threatened to impose sanctions on Iraq if it decides to push the US out.

"If they do ask us to leave, if we don?t do it in a very friendly basis, we will charge them sanctions like they've never seen before ever. It'll make Iranian sanctions look somewhat tame," said Trump, speaking to reporters on Air Force One, according to a CNBC report.

The lack of market focus on longer-term oil supply risk was underscored by a widened backwardation in the Brent forward curve.

Meanwhile, supporters of embattled Venezuelan President Nicolas Maduro, possibly capitalizing on a US focus in the Middle East, on Sunday blocked the re-election of opposition leader Juan Guaido in the National Assembly, according to media reports. The US had previously recognized Guaido as Venezuela's legitimate president, and levied sanctions against the Maduro regime and the Venezuelan oil sector.

According to ClearView Energy Partners, Maduro's actions may lead to more sanctions from the US.

Venezuelan oil output averaged 650,000 b/d in October, up from 600,000 b/d in September, according to the latest S&P Global Platts survey. Venezuelan oil production has fallen by 1.24 million b/d over two years.

S&P Global Platts Analytics estimated Venezuelan oil output would fall to 375,000 b/d by the end of 2020, in its low-case scenario, under which Maduro retained power, the US imposed secondary sanctions similar to its Iran oil sanctions and creditors accelerated their pursuit of PDVSA assets.

-- Jeff Mower, jeff.mower@spglobal.com

-- Edited by Geetha Narayanasamy, geetha.narayanasamy@spglobal.com