Oil prices drop as Syria risk seen muted af­ter week­end air strikes

Business World - - WORLD MARKETS -

NEW YORK — Oil prices dropped on Mon­day as in­vestor con­cern waned about es­ca­lat­ing tensions in the Mid­dle East fol­low­ing air strikes on Syria over the week­end.

The US, France and Britain launched 105 mis­siles on Satur­day, tar­get­ing what they said were three chem­i­cal weapons fa­cil­i­ties in Syria in re­tal­i­a­tion for a sus­pected poi­son gas at­tack on April 7.

Oil prices had risen nearly 10% in the run- up to the strikes, as in­vestors bulked up on as­sets, such as gold or US Trea­suries, that can shield against geopo­lit­i­cal risks.

“Some of the ease in Syria is the head­line that is bring­ing it down,” said Phil Streible, se­nior mar­ket strate­gist at RJO Fu­tures in Chicago. Be­cause the at­tacks were more sur­gi­cal than an­tic­i­pated in more ex­treme sce­nar­ios, the mar­ket has shrugged off bullish fac­tors, he said.

“It has got ev­ery­thing to pos­si­bly boost it: weak dol­lar, Syria, po­ten­tial sanc­tions, White House un­cer­tainty, China trade,” he said.

Brent crude oil fu­tures set­tled down $ 1.16 at $ 71.42, while US crude fu­tures were down $1.17 at $66.22 a bar­rel.

“As far as de­vel­op­ments in Syria are con­cerned, the mar­ket has had a sigh of re­lief in the sense that there is no es­ca­la­tion, ei­ther diplo­mat­i­cally, or on the ground, fol­low­ing the in­ter­ven­tion by the US, France and the UK,” said BNP Paribas global head of com­mod­ity mar­ket strat­egy Harry Tchilin­guirian.

“As a macro as­set- al­lo­ca­tor, if you want to hedge your port­fo­lio against geopo­lit­i­cal risk, your prime can­di­date is oil, es­pe­cially if that risk is in the Mid­dle East.”

Al­though Syria it­self is not a sig­nif­i­cant oil pro­ducer, the wider Mid­dle East is the world’s most im­por­tant crude ex­porter and ten­sion in the re­gion tends to put oil mar­kets on edge.

“In­vestors con­tin­ued to worry about the im­pact of a wider con­flict in the Mid­dle East,” ANZ bank said.

Fund man­agers hold more Brent fu­tures and op­tions than at any time since records be­gan in 2011, ac­cord­ing to data from the In­terCon­ti­nen­tal Ex­change.

In­vestors have added to their bullish po­si­tions in Brent, which now equal nearly 640 mil­lion bar­rels of oil, in nine out of the last 10 months.

The next event on in­vestors’ radar is po­ten­tial US with­drawal from a deal on Iran’s nu­clear re­stric­tions, signed in 2015. US Pres­i­dent Don­ald Trump has threat­ened to with­draw the US from the pact, bar­ring ac­tion from Congress and Eu­rope. Even the im­po­si­tion of uni­lat­eral sanc­tions by the US gov­ern­ment could ham­per ex­ports of oil from Iran, one of the world’s largest pro­duc­ers. —

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