Oil prices hit highest since 2014 as missile attack concerns grow

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An oil tanker is seen at sunset anchored off the Fos-Lavera oil hub near Marseille, France (file). Oil hit its highest in more than three years in early trade yesterday after Saudi Arabia said it intercepted missiles over Riyadh and international tensions about Syria grew.
Oil hit its highest in more than three years yesterday after Saudi Arabia said it intercepted missiles over Riyadh and international tensions about Syria grew. Both US crude and global benchmark Brent traded at the highest levels since 2014 as concerns about airstrikes drove the market higher. Geopolitical concerns overshadowed global crude inventories as the markets’ main driver. “A bearish inventory report was quickly negated on word of intercepted rockets over Riyadh, which just adds to the recent spike in geopolitical tensions,” said Anthony Headrick, energy market analyst and commodities futures broker at CHS Hedging.

 

Prices began to rally as US President Donald Trump threatened to fire missiles at Syria in response to a suspected chemical attack last week. Prices climbed further as Saudi Arabia’s air defence forces intercepted a missile over the capital Riyadh yesterday, Saudi-owned broadcaster Al Arabiya said, after at least three blasts were heard in the city. Brent crude jumped to a high above $72 a barrel, its strongest since early December 2014, after Trump’s comments, while US crude rose above $67 a barrel. Gold rallied for a fourth day as investors ditched risk-linked assets such as equities.

Brent rose $1.59 on the day to $72.63 a barrel by 11.03am EST [1703 GMT], while US crude futures rose $1.62 cents to $67.13 a barrel, a 2.5% gain. Some major airlines were re-routing flights yesterday after Europe’s air traffic control agency warned aircraft flying in the eastern Mediterranean to exercise caution due to possible air strikes on Syria. Trump has criticised Moscow for standing by Syrian President Bashar al-Assad. “Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and ‘smart!’,” he wrote in a post on Twitter yesterday.

The US and its allies are considering air strikes against Assad’s forces following a poison gas attack last weekend. Syria is not a significant oil producer, but any sign of conflict in the region tends to trigger concern about potential disruption to crude flows across the wider Middle East, home to some of the world’s biggest producers. There are also concerns that the US could renew sanctions against Iran. “The focus right now is definitely on a possible military strike against Syria,” said Commerzbank’s head of commodity research, Eugen Weinberg. “We think the fundamentals do not justify the current price, but unfortunately the market is focusing more on the politics and ignoring some of the warning signs, especially the hike in US oil production.” Saudi Arabia Energy Minister Khalid al-Falih said yesterday that his country would not sit by and let another supply glut surface, implying that the kingdom would continue to withhold supply.

 

Sources and photo-credits: Reuters, Gulf Times