Oil prices rose on Friday and are headed for their largest weekly gain since last July due to increasing tensions in the Middle East and OPEC’s report showing global oil stocks rapidly declining. Statoil photo by Olaf Nagelhus.
Oil prices on track for largest gain since July
Oil prices were up on Friday as tensions in the Middle East smouldered investors weighed data from OPEC’s monthly report released on Thursday which showed declining global crude stocks.
By 1:49 p.m., EDT, Brent crude rose 74 cents to $72.76/barrel and is set for a weekly gain of about $5, or almost 8 per cent. US WTI was up 46 cents to $67.53/barrel, over 8 per cent for the week. The Canadian Crude Index gained 1 cent to $49.33.
Earlier this week, US President Donald Trump tweeted out a threat to Russia. “Get ready Russia, because they [missiles] will be coming, nice and new and “smart!” You shouldn’t be partners with a Gas Killing Animal who kills his people and enjoys it!”
John Kilduff, partner at Again Capital Management, says the rising Middle East tensions have resulted in traders locking in long crude positions ahead of the weekend.
“The geopolitical jitters just keep getting priced in here more and more, as we get closer to the moment of the strikes, if there are any,” Kilduff told Reuters. Kilduff added that because of Syria’s relationship with powerful oil producing nations, the embattled Middle Eastern country poses a risk to global stability.
“Syria is a client state of both Russia and Iran and the risk for escalation is quite high and I think that is what the market is worried about.”
Since the president’s threatening tweet on Wednesday, there has been no clear sign that a US-led attack on Syria is near. On Thursday, Trump tweeted that the US could begin an attack on Syria “very soon or not so soon at all”.
“The Syrian escalation risk cannot be fully written off, but we view that it deserves less of a premium than three days ago,” Reuters reports Petromatrix said in a note.
In its monthly report, OPEC data showed the global oil stocks surplus is about 90 per cent cleared. The cartel also reported that its collective output dropped to 31.96 million barrels per day (b/d) in March, down by 201,000 b/d since February.
Saudi Arabia and Russia are pushing to continue the OPEC crude supply agreement beyond its expiry date at the end of the year.
The International Energy Agency said on Friday that oil markets could become too tight if supply continues to be restrained.
“It is not for us to declare on behalf of the Vienna agreement countries that it is ‘mission accomplished’, but if our outlook is accurate, it certainly looks very much like it,” the IEA said.
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