Oil prices up after US missile strike on Syria raises tensions

World benchmark North Sea Brent crude futures were up 1.5 per cent at US$55.71 a barrel, in trading early Friday, Arabian Gulf time.

Oil prices rose on Friday after US President Donald Trump ordered missile strikes on a Syrian government airbase in retaliation for a nerve-gas attack on Syrian civilians earlier this week.

World benchmark North Sea Brent crude futures were up 0.51 per cent, or US$0.31, at $55.20 a barrel, in trading late in the afternoon Arabian Gulf time after having jumped 1.5 per cent earlier in the day.

Syria is not itself a major oil producer but any escalation of violence in the Middle East raises the spectre of the conflict spreading, especially as direct allies of the regime of President Bashar Assad include Iran and Russia, two of the world’s largest oil exporters.

Syria’s motive for the nerve gas use was to test American resolve, some analysts argued, though others said the timing was puzzling.

“The attack itself opened the way for further US or Western military intervention to degrade Syrian military capabilities at a time where the momentum has been decidedly been behind Russian-backed Syrian forces,” said Reed Foster, a defence analyst at IHS Jane’s.

Though the US military warned Russia in advance and avoided targeting the Russian presence at the airbase, a Russian government spokesman said yesterday that the strike was an act of aggression against a sovereign state.

“This is a major escalation and a dangerous one,” said Phyllis Bennis, a Middle East analyst at the Institute of Policy Studies in Washington, in comments to MSNBC.

She pointed out that the move widens US direct involvement in regional conflict, where it has not only raised troop levels in Iraq for the fight against ISIL terrorists but also is involved in Yemen. It also risks escalated conflict between Russia and the US, which had previously been expected to soften its position on Ukraine-related sanctions on Russia, she said.

The oil market reaction was fairly muted, though, as the US strikes were limited to 59 sea-launched Tomahawk missiles from destroyers in the eastern Mediterranean, aimed at the Al-Shayrat Air Base, which is where the chemical attack was launched, according to the US Department of Defense.

Oil prices had already been firming and are up nearly 10 per cent since the end of last month, as worries eased that an output restraint deal by Opec and some non-Opec producers was having only limited effect in reducing the world oil glut.

While crude oil inventories continued to rise last week, they were running at a level lower than the same time last year and US refineries are expected to ramp up their activity after a period of heavy maintenance to meet demand for the US summer driving season, according to Eugene Lindell, an analyst at JBC Energy consultants in Vienna, though he feels the extra risk premium may not last.

“While technically things look good for a retest of the year to date highs at $57, ... this geopolitical risk premium could disappear as quickly as it emerged,” he said.​