FILE PHOTO: A worker checks the valve of an oil pipe at Nahr Bin Umar oil field, north of Basra, Iraq December 21, 2015. REUTERS/Essam Al-Sudani/File Photo
NEW YORK: Oil prices rose on Friday, trading near a one-month high after the United States fired missiles at a Syrian government air base, roiling global markets and raising concern that the conflict could spread in the oil-rich region.
The toughest US action yet in Syria’s six-year-old civil war has ramped up geopolitical uncertainty in the Middle East. This supported oil futures, which were on track for a 3% weekly increase on signs 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,” said Frank Klumpp, oil analyst at Landesbank Baden-Wuerttemberg, based in Stuttgart, Germany.
The market could get a further boost when the Baker Hughes US rig count is released on Friday afternoon, if it shows a slower pace of increase in oil drilling.
Although Syria has limited oil production, any escalation of the conflict feeds fears about oil supplies due to the country’s location and alliances with big oil producers in the region.
Oil, gold, foreign exchange and bond markets reacted strongly to the attack but reversed some of the sharp moves after monthly US employment figures came in weaker than expected.
Brent crude futures were up 28 cents at US$55.17 a barrel by 11:33am EDT (1533 GMT) after reaching an intraday peak of US$56.08, the highest since March 7, shortly after the US missile strike was announced.
US West Texas Intermediate (WTI) crude futures were up 37 cents at US$52.07 a barrel, having reached an intraday high of US$52.94.
Oil came off session highs as US economic data weighed on global markets. Some analysts said the conflict in Syria had no bearing on oil fundamentals and the political risk premium could vanish quickly.
“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.
Traders eyed news from Canada, where two oil sands producers have cut production due to a shortage of synthetic crude following a plant fire.
“The production outages in Canada will ... continue to have a price-supportive effect,” said Carsten Fritsch, commodities analyst at Commerzbank.
In bearish news, non-Opec producer Kazakhstan raised production last month despite its pledge to cut output by 20,000 barrels per day in the first half of 2017.
Preliminary government data showed a 2% month-on-month rise in March. - Reuters
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