Brent crude this week broke the $72 barrier for the first time since 2014 on the latest developments in Syria. President Donald Trump earlier this week threatened Russia with missile strikes after an alleged chemical attack that the U.S. and UK were quick to blame on the Syrian army following reports from rebel-held Douma.
Despite some cooler heads noting that neither Washington nor Moscow really want to have a third world war on their hands, markets are more jittery than they have been for a long time, with the news from Syria overshadowing any other piece of news about the oil industry.
In fact, as Commerzbank’s chief of commodities Eugen Weinberg noted, oil’s fundamentals do not justify such a price jump and yet prices are jumping as the world watches the Middle East yet again. But it would all be short-lived, as Trump appeared to back down on a Syria strike with a ‘maybe yes, maybe no’ qualification that eased tensions and pushed equities markets back into rally mode.
Meanwhile, U.S. crude oil production rose further last week, hitting 10.525 million bpd, up from 10.46 million bpd a week earlier. This should have had a marked negative effect on prices, but it hasn’t because of the events in Syria, where Washington is effectively supporting the Jaish al-Islam (the Army of Islam) – a Saudi-backed rebel group that controlled Douma – the town where the alleged chemical attack occurred.
It seems that the heating-up…