Oil Retreats on Speculation Syria Intervention Will Be Limited
Oil retreated from its highest close in three years in New York as Middle East tensions abated on speculation that U.S.-led military intervention in Syria won’t go beyond the weekend’s missile strikes.
Futures slipped as much as 1.9 percent in New York. President Donald Trump declared “mission accomplished” a day after the U.S., France and the U.K. 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. The number of rigs drilling for crude in the U.S. rose to a three-year high, signaling production may rise from record levels.
“Underpinning this retreat is a consensus that there will be no further occurrences of U.S. military action in Syria,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London.
Oil last week rose to levels last seen in 2014 amid growing geopolitical risks, with investors anticipating that retaliation against Assad would threaten production in the region, while tensions between Saudi Arabia and Iran-backed rebels in Yemen also added to concerns. Still, surging U.S. output continues to weigh on investor sentiment even as the International Energy Agency says the Organization 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 $66.46 as of 10:27 a.m. in London. The contract closed at $67.39 on Friday, the highest since December 2014, capping an 8.6 percent weekly gain. Total volume traded was about 61 percent 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. The contract climbed 8.2 percent last week. The global benchmark crude traded at a $5.05 premium to June WTI.
Yuan-denominated futures for September delivery rose 0.4 percent to 427.9 yuan a barrel on the Shanghai International Energy Exchange. Futures lost 0.4 percent to close at 427 yuan on Friday.
The U.K. Foreign Secretary said there is “no proposal on the table” for further strikes. Trump has said he wants U.S. troops out of Syria quickly, though United Nations Ambassador Nikki Haley wouldn’t confirm a timetable for withdrawal on Sunday. Haley also warned fresh sanctions may be imposed on Russia for its support of Assad.
Meanwhile, in the U.S., 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.