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  • Tensions in Middle East escalate after US airstrike kills top Iranian general.
  • Crude oil stockpiles in US fell sharply in week ending December 27th.
  • Number of active oil rigs in US dropped to 670 from 677.

Crude oil prices spiked higher on Friday after the US killed a top Iranian general, Qasem Soleimani, in a drone attack at the Baghdad Internation Airport. With investors pricing supply disruptions from the area, the barrel of West Texas Intermediate advanced to its highest level in more than seven months at $64.05.

Eyes on Middle Eastern oil output

Commenting on the potential impact of heightened tensions in the Middle East on the oil market, “any significant disruption in the Middle East could tighten the global balance sheet fairly quickly, and it wouldn’t take too much to eat into the 900Mbbls/d surplus that we currently forecast over the first half of 2020,” said ING analysts. “However, saying that, if the Iranians attempted to block oil shipments through the Strait of Hormuz, the Saudis could increase oil flows through their East-West pipeline, and ship from the Red Sea instead.” 

In the second half of the day, the WTI staged a correction as the lack of fresh developments surrounding the conflict in the Middle East allowed investors to book their profits. 

On the other hand, the weekly data published by the Energy Information Administration (EIA) on Friday revealed that crude oil stocks in the US fell by 11.4 million barrels during the week ending December 27th and helped WTI limit its losses. Additionally, Baker Hughes reported that the number of active oil rigs in the US dropped to 670 from 677 a week ago.

As of writing, the barrel of WTI was trading at $62.65, adding 2.45% on a daily basis.