Oil near one-month high after US missile strikes

Oil traded near a one-month high yesterday after the US fired missiles at a Syrian government airbase, sending shockwaves through global markets and raising concerns 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.

Oil, gold, foreign exchange and bonds initially reacted strongly to the attack but reversed some of the sharp moves later in the session after the release of weaker-than-expected monthly US employment figures.

Brent crude rose 15c to $55.04 a barrel after reaching an intraday peak of $56.08, the highest since March 7, shortly after the US missile strike was announced.

US West Texas Intermediate (WTI) crude rose 22c to $51.92 a barrel, having reached an intraday 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.

Although Syria has limited oil production, its location and alliances with big oil producers in the region mean any escalation of the conflict has the potential to increase supply-side fears. Oil pared some of the gains later in the session as concerns about an escalation faded and US economic data weighed on global markets.

Other analysts said the conflict in Syria had no bearing on oil fundamentals and the political risk premium could fall as quickly as it had appeared.

Nevertheless, oil futures had been on the rise in previous sessions on signs of higher US demand and lower product inventories.

Reuters