Oil prices surge after United States launches missile strike in Syria
- Author: Leroy Wright Apr 08, 2017,
Apr 08, 2017, 19:34
Oil prices increased today after the USA missile strikes on a Syrian airfield, media reported.
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.
Brent crude futures were up 28 cents at $55.17 a barrel by 11:33 a.m. EDT (1533 GMT) after reaching an intraday peak of $56.08, the highest since March 7, shortly after the USA missile strike was announced. On the longer-term time frames, it can be seen that crude oil is safely inside its ascending trend channel and could be on track towards hitting the resistance around $55-56.
In fact, WTI crude oil just moved past the area of interest and highest Fib level on the 4-hour chart.
"What really matters is the difference between the bid and the ask", said Owain Johnson, managing director of energy research and product development at CME Group. "In the short term, oil prices could spike due to potential short squeezes from geopolitical risks, especially ahead of Friday's U.S. non-farm payroll data", Gordon Kwan, head of oil and gas research at Nomura, said in a research note. "There's a lot going on here: Syria and talks with China". Other media outlets reported the spike, speculating the attacks could affect oil supply in the Middle East if the conflict escalates. Overnight, U.S. Treasury yields dropped to their lowest level in over four months at 2.29 per cent "Safe-haven flows are always affected by political events, and when it affects countries where the U.S. and Russian Federation are interested, then investors become even more nervous because of relations (between those two)", said DZ Bank strategist Daniel Lenz.
In November, OPEC agreed to cut oil production in an effort to prop up prices.
All of this adds up to potential turmoil in the world and also to potential supply disruptions to crude which have reacted as expected and moved materially higher.
The toughest US action yet in Syria's six-year-old civil ramped up geopolitical uncertainty in the Middle East. Oil, gold, foreign exchange, German and USA 10-year bonds, all reacted strongly to the air strikes.
The news of the Syrian attack sent global stocks lower but most of the losses were pared back after U.S. officials described the mission as a one-off.
Gasoline futures rose 1.66 cents, or 0.96%, to $1.7462 a gallon. Corresponding to global cues, the price of the Indian basket of crude oil has risen to $53.05/bbl on April 6 from $51.28/bbl on March 31.