Oil prices fell almost one per cent overnight, surrendering some recent gains as investors reconsidered the likelihood of immediate supply disruptions in the Middle East after the United States killed an Iranian military commander last week.
Brent crude fell 64 US cents, or 0.93 per cent, to settle at $US68.27 a barrel. US West Texas Intermediate crude fell 57 US cents, or 0.9 per cent, to settle at $US62.70 a barrel.
Prices surged during the previous two sessions on fears of escalating conflict and potential Middle East supply disruptions after a January 3 Baghdad drone strike killed Qassem Soleimani, head of Iran’s elite Quds Force, and Iran vowed revenge.
Brent reached its highest since September while WTI rose to its strongest since April.
“The expansion in geo-risk premium related to Iran appears to be running out of steam as the complex seems to be taking a ‘wait and see’ attitude ahead of possible Iranian retaliation to last week’s events,” Jim Ritterbusch, president of trading advisory firm Ritterbusch and Associates, said in a note.
Chevron Corp Chief Executive Michael Wirth told CNBC that the oil markets remain well supplied despite the recent escalation of tensions.
“Fundamentally supply and demand remain where they were before these incidents,” Wirth said in the interview.
Consultancy Eurasia Group said Iran probably would focus on US military targets rather than energy targets.
“That’s not to say it won’t continue low-level harassment of commercial shipping or regional energy infrastructure, but these activities will not be severe,” it added.
Still, the United States Maritime Administration website renewed its warning about threats to US commercial vessels from Iran and its proxies in the Gulf and surrounding area.
Prices also fell despite higher compliance among the Organisation of the Petroleum Exporting Countries on meeting production quota curbs aimed at reducing supply.
OPEC members pumped 29.5 million barrels per day last month, down 50,000 bpd from November’s revised figure, according to a Reuters survey.
US crude oil stockpiles likely fell for the fourth straight week last week, though refined products stocks were expected to have risen, a Reuters poll showed on Monday ahead of weekly data.
The average estimate by six analysts was for crude stocks to have fallen by 3.6 million barrels in the week to January 3.