Oil prices rise on concerns Middle East conflict could spread
Oil prices rose in trading on Friday to near one-month highs after the United States fired missiles at a Syrian government air base. Global markets reacted on concerns about increasing conflict in the Middle East.
The Trump administration’s decision to attack the air base is the toughest US action to date in Syria’s six-year-old civil war and has boosted geopolitical uncertainty in the Middle East.
Reuters reports the uncertainty has bumped up oil prices, which were on track for a 3 per cent weekly increase after reports of higher US demand and lower product inventories.
“Oil markets are back in bullish mode after the setback of the previous weeks. This news flow seems to bring geopolitical risks back on the radar,” Frank Klumpp, oil analyst at German-based Landesbank Baden-Wuerttemberg told Reuters.
Despite lower oil production in Syria, any escalation of conflict in the Middle East feeds fears about global oil supplies due to the country’s location and its alliances with big oil producers in the region.
Brent crude futures were up 35 cents to $55.24/barrel by 11:33 a.m. EDT, after reaching an intraday peak of $56.08, the highest since March 7. US WTI crude futures were up 54 cents to $52.24/barrel, after reaching an intraday high of $52.94.
US economic data showing weaker than expected employment figures weighed on global markets. According to Reuters, some analysts believe the Syrian conflict had no bearing on oil fundamentals and the political risk premium could quickly vanish.
“This might just be a speculative move higher because there’s nothing fundamental that’s supporting this rise,” said Hamza Khan, head of commodities strategy at ING.
The Baker Hughes rig count released on Friday showed an increase of 10 oil rigs this week, up to 672. The number of gas rigs was increased by 5. In Canada, the rig count was down by 23 rigs from last week to 132, with oil rigs down 13 to 42 and gas rigs down 10 to 90.
Analysts are also weighing information from Canada concerning the fire at an oilsands plant that has affected production at ConocoPhillips and Nexen facilities.
“The production outages in Canada will … continue to have a price-supportive effect,” Carsten Fritsch, commodities analyst at Commerzbank, told Reuters.
Kazakhstan has reported that despite its pledge to cut output by 20,000 b/d for the first half of 2017, it actually raised production last month by 2 per cent, according to preliminary government data.