Oil at 3-Yr. High After Trump Missile Threats

Oil at 3-Yr. High After Trump Missile Threats

Geopolitical risk has lifted prices to multiyear highs this week, as investors focused on news reports of potential action by western countries in Syria, along with reports that Saudi Arabia intercepted a missile over Riyadh on Wednesday, causing concern of instability in the region.

These bullish factors more than offset pressure from a US government report showing crude oil inventories C-STK-T-EIA rose by 3.3 million barrels, while production C-OUT-T-EIA hit a record 10.53 million barrels per day (bpd).

Light, sweet crude for May delivery advanced 25 cents, or 0.4%, to $67.07 a barrel on the New York Mercantile Exchange, closing at the highest level since December 2014.

Oil prices flared on Wednesday to a six-year high of $73 a barrel, especially after tensions rose between the U.S. and Russian Federation over the Syrian crisis.

Is the recent rise in crude oil prices above $70 a barrel a temporary phenomenon because of a fresh round of geopolitical tensions in West Asia? Prices had followed equity markets lower amid growing fears of a trade war between the world's two largest economies.

Talk of Middle East conflicts has overshadowed bearish EIA data.

The latest Middle East-related political risk factor is related to events in Syria, where a military confrontation may be brewing with the USA on the one side and Russia, Syria and Iran on the other. U.S. President Donald Trump spooked markets Wednesday by suggesting a missile strike could be imminent, but he walked back that rhetoric early Thursday.

Not all oil market indicators pointed to ongoing price rises, however. Brent crude oil, the worldwide benchmark, was trading at $72.30.

On Thursday, OPEC said the global oil stocks surplus was close to evaporating due to healthy energy demand and its own supply cuts.

In its monthly short-term energy outlook, the agency forecast that US crude oil output will rise by 750,000 barrels per day (bpd) to 11.44 million bpd next year.

Adding insult to injury, the news agency went on to state that "Beyond the immediate threat of conflict in the Middle East, there are broader signs that OPEC is losing influence over oil prices due to geopolitical events beyond its control: the economic crisis in Venezuela and the re-imposition of US sanctions on Iran could involuntarily double the size of the group's agreed cuts by year-end, with further potential to send prices spiraling higher".

U.S. crude inventories rose by 3.3 million barrels in the week to April 6, according to the U.S. Energy Information Administration.

The US now produces more crude than top exporter Saudi Arabia. The big build was a surprise after analysts had forecast a decrease of 189,000 barrels.