Oil inches up as Iran and United States trade threats

New York: Oil prices edged up on Monday, after Brent touched above $70 a barrel, as rhetoric from the United States, Iran and Iraq fanned tensions in the Middle East after a US airstrike killed a top Iranian military commander.

Brent crude futures rose 22 cents to $68.82 a barrel by 12:19 p.m. EST (1719 GMT), after soaring to a high of $70.74 a barrel from Friday`s settlement. US West Texas Intermediate crude was up 7 cents at $63.12 a barrel after touching $64.72, its highest since April. Oil pared gains during the session.

"From here, we see the pace of advance slowing as the complex will likely be demanding evidence of Iranian retaliation capable of actually disrupting global crude supply," Jim Ritterbusch, president of trading advisory firm Ritterbusch and Associates, said in a note.

Oil jumped more than 3% on Friday after a US airstrike in Iraq killed Iranian military commander Qassem Soleimani, heightening concerns about an escalation in conflict in the Middle East and the possible impact on oil supplies.

The region accounts for nearly half of the world`s oil production, with a fifth of the world`s oil shipments passing through the Strait of Hormuz. US President Donald Trump on Sunday threatened to impose sanctions on Iraq, the second-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), if U.S. troops were forced to withdraw from the country.

Baghdad earlier called on US and other foreign troops to leave Iraq. Trump also said that the United States would retaliate against Iran if Tehran were to strike back after the killing. [nL1N29B01A]
"The situation brings lots of uncertainty and geopolitical tea-leaf reading on reactions. While the closure of the Strait of Hormuz remains a very unlikely event, the deterioration in Iraq bears supply risks," said Norbert Rucker, head of economics at Swiss bank Julius Baer.

The Economist Intelligence Unit raised its first-quarter projection for Brent by $5 to $70 a barrel, assessing that Iran is likely to want to avoid open conflict. "We maintain our forecast that the two countries are likely to avoid outright war. Iran is not in a position financially, after more than a year of crippling U.S. sanctions, to finance a lopsided war with the US," EIU global economist Cailin Birch wrote in a note.

In the United States, crude stocks fell by their most since June as exports exceeded 4 million barrels per day for the first time in history, the Energy Information Administration said on Friday. [EIA/S]
OPEC oil output fell in December as Nigeria and Iraq adhered more closely to pledged reductions and top exporter Saudi Arabia made further cuts ahead of a new production-limiting accord, a Reuters survey found.