Crude oil storage tanks are seen from above at the Cushing oil hub
Oil prices rose on Friday, trading near a one-month high and closing the week up 3 percent after the United Statesfired missiles at a Syrian government air base, raising concern that the conflict could spread in the oil-rich region.
The toughest U.S. 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 U.S. 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 U.S. 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 U.S. employment figures came in weaker than expected.
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 U.S. missile strike was announced. For the week, Brent was up 4.4 percent.
U.S. 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.
U.S. 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.
“The production outages in Canada will … continue to have a price-supportive effect,” said Carsten Fritsch, commodities analyst at Commerzbank.
In bearish news, non-OPEC producer Kazakhstan raised production last month despite its pledge to cut output by 20,000 barrels per day in the first half of 2017.
Preliminary government data showed a 2 percent month-on-month rise in March.
An oil tanker moored in the port of New York (USA)
Crude oil storage tanks are seen from above at the Cushing oil hub, appearing to run out of space to contain a historic supply glut that hammered prices, in Cushing, Oklahoma.