Oil retreats on speculation Syria intervention will be limited | Fin24

Oil retreats on speculation Syria intervention will be limited

Apr 16 2018 15:37
Grant Smith, Bloomberg

London - Oil retreated from its highest close in more than three years as Middle East tensions abated on speculation that US-led military intervention in Syria won’t go beyond the weekend’s missile strikes.

Futures slipped as much as 1.9% in New York. President Donald Trump declared “mission accomplished” a day after the US, France and the UK launched military strikes in response to Syrian leader Bashar al-Assad’s suspected chemical attack on civilians.

British Foreign Secretary Boris Johnson insisted that the hit was a one-time move. Oil rigs in the US rose to a three-year high, signaling production may rise from record levels, contributing to crude’s drop.

“Underpinning this retreat is a consensus that there will be no further occurrences of US military action in Syria,” said Stephen Brennock, an analyst at PVM Oil Associates in London.

Oil has surged to levels last seen in 2014 amid growing geopolitical risks, with investors anticipating that retaliation against Assad would threaten production in the region.

Tensions between Saudi Arabia and Iran-backed rebels in Yemen also added to concerns. Still, surging US output continues to weigh on investor sentiment even as the International Energy Agency says the Organisation of Petroleum Exporting Countries is close to reaching its target of eliminating a global crude glut.

West Texas Intermediate for May delivery fell as much as $1.25 to $66.14 a barrel on the New York Mercantile Exchange before trading at $66.91 as of 15:05. The contract closed at the highest since December 2014 on Friday, rising 8.6% in the week. Total volume traded was about 30% above the 100-day average.

Brent for June settlement lost as much as $1.47 to $71.11 a barrel on the London-based ICE Futures Europe exchange, after rising 8.2 percent last week. The global benchmark crude traded at a $5.30 premium to June WTI.

Yuan-denominated futures for September delivery rose 0.4% to 427.9 yuan a barrel on the Shanghai International Energy Exchange.

No further strikes

The UK foreign secretary said there is “no proposal on the table” for further strikes on Syria and Trump has said he wants US troops out of the country quickly.

Meanwhile, in the US, working oil rigs rose by seven last week to 815, the highest since March 2015, according to data from Baker Hughes. The rig fleet has expanded in 10 of the past 12 weeks.

The expansion came after the Energy Information Administration data showed that American oil production rose to a fresh record of 10.5 million barrels a day.

Other oil-market news:

• Citigroup raised its Brent price forecasts in 2018 and 2019 to $65 a barrel and $55 a barrel, respectively, due to higher supply risks in Venezuela and Iran, according to an April 15 note.

• Hedge funds’ bets that Brent crude futures will climb reached a new high in the week ended April 10 on concern tensions across the Middle East will put almost half of the world’s supply at risk.

• The first look at the financial guts of Saudi Aramco show a corporate cash gusher, pumping billions in profit every month and beating every other big name in global business.

• Still, Aramco’s expanding refining operations lagged well behind those of its closest competitors in the first half of 2017.

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commodities  |  markets  |  oil


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