Oil prices surpassed $70 per barrel on Monday for the first time in more than three months as the United States warned of increased threats to energy facilities in the Middle East after the assassination of an Iranian general, Qassem Soleimani, last week.
The international oil benchmark, Brent crude, jumped 1.5 per cent to as high as $70.74 per barrel, its highest price since September, before easing to $69.17 per barrel as of 5.10pm Nigerian time.
The 2020 budget, which was signed by the President Muhammadu Buhari in December, was based on oil production of 2.18 million bpd with an oil price benchmark of $57 per barrel.
Brent, against which Nigeria’s oil is priced, has climbed more than five per cent since a US air strike killed Soleimani in Iraq on Friday.
The latest gains followed a weekend of threats between Washington and Tehran, bringing the pair closer to conflict and raising tensions throughout the Middle East.
Crude oil previously traded above $70 per barrel in September 2019 after drone strikes, which the US blamed on Iran, temporarily knocked out half of Saudi Arabia’s oil production.
Soleimani was the head of the Iranian Revolutionary Guard’s overseas forces and controlled the regime’s extensive influence across Lebanon, Iraq, Syria and Yemen.
The US State Department warned on Sunday that there was an increased risk of attacks on oil facilities and other targets in Saudi Arabia, amid widespread expectations Iran would retaliate for the killing of Soleimani.
Following the assassination, Iran said it would no longer abide by any of its commitments to the 2015 nuclear accord it signed with world powers.
The price of West Texas Intermediate, the US crude oil marker, strengthened on Monday by 1.7 per cent to a high of $64.72, before easing to $63.85 by lunchtime in London.
Oil prices will “likely rise much further if Iran retaliates, either by attacking Saudi oil facilities as it did in September, or attempting to block the Strait of Hormuz, through which 20 per cent of global oil supply is transported”, said Michael Pearce, senior US economist at research group Capital Economics.
Market analysts at Goldman Sachs and UBS have cast doubt on whether oil prices will continue to rally beyond $70 a barrel because of strong production from outside the Middle East.