Oil rises after US strike in Syria

Geopolitical risks back on the radar as commodity marks a weekly gain of 3%

Oil prices rose on Friday, trading near a onemonth high and closing the week up 3 per cent after the United States fired missiles at a Syrian government airbase, 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 heightened geopolitical uncertainty in the Middle East. This supported oil futures, along with signs of higher US demand.

“It’s back to the old adage of don’t go home short the weekend,” said Carl Larry, oil and gas consultant at Frost and Sullivan. “There’s a lot going on here: Syria and talks with China.” Larry noted that many in the market also believe Venezuela could be producing below reported levels.

“Venezuela could turn out to be another Iraq where they say they’ve been pumping 1.5 million bpd and it turns out to be nothing. It could get ugly, and markets could jump quickly.” The market shrugged off a report showing US drillers added oil rigs for a 12th straight week to cash in on a recovery in crude prices. Oil drillers increased the number of active oil rigs by 10, according to Baker Hughes.

Although Syria is not a major oil producer, 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 moderated some of their sharp moves after monthly US employment figures came in weaker than expected.

Brent, WTI

Brent crude futures settled up 35 cents at $55.24.

Brent reached a session high of $56.08, the highest since March 7, shortly after the US missile strike was announced. For the week, Brent was up 4.4 per cent.

US West Texas Intermediate (WTI) crude futures were up 54 cents at $52.24 a barrel, off the session high of $52.94.

“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.

US economic data pressured prices, and some analysts said the conflict in Syria had no bearing on oil market fundamentals.

“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.