- As Russia suspends military deal with U.S. over bombing of Syria
Oil prices rallied on Friday after the United States launched a missile strike against Syria, sparking fears that an escalation of the conflict in the crude-rich Middle East could disrupt supplies.
Both main contracts jumped more than two percent to their highest levels in a month after US President Donald Trump ordered an assault in retaliation for a chemical attack in Syria that Washington blamed on Damascus.
After benchmark contract Brent struck $56.08 per barrel and WTI $52.94, gains were pared through the day.
By 1100 GMT, Brent North Sea crude for delivery in June was up 35 cents at $55.29 per barrel compared with Thursday’s close.
The US benchmark West Texas Intermediate for May won 48 cents at $52.18.
“The situation remains fluid in Syria at the moment as the implications of the massive cruise missile strike from the United States get digested,” said Oanda senior market analyst Jeffrey Halley.
“Among the most pressing questions will be: is this a one-off attack and are other nations going to join in? What will be the response of Iran and Russia — two of the world’s largest oil producers and staunch allies of the Assad regime?”
Sukrit Vijayakar of Trifecta Consultants said the crude oil market is likely to hold on to gains over the next few months.
“For now, early this morning they have been given a fillip as news of the US firing missiles at Syria has propelled prices higher by over one dollar a barrel,” he said.
The military strike ordered by US president Donald Trump targeted radars, aircraft, air defence systems and other logistical components at a military base south of Homs in central Syria.
The attack comes two days after a suspected sarin attack ordered by President Bashar al-Assad, which Trump has described as “very barbaric”.
While Syria is not a major oil producer, it borders Iraq, OPEC’s second-largest crude producer.
Oil prices have struggled to hold above $51 a barrel owing to concerns about an OPEC-led output cut put in place in January as part of a drive to address a global supply glut and overproduction.
There are worries also that prices above $50 will encourage US shale producers to ramp up production as it becomes more cost-effective.
“With the oversupply concerns still a dominant theme in the oil markets, extreme upside gains may be limited,” said FXTM research analyst Lukman Otunuga.
A world supply glut of crude hammered prices from highs of more than $100 per barrel in June 2014 to near 13-year lows below $30 in February 2016.
In the meantime, Russia on Friday suspended a deal on military cooperation with the U.S. in Syria, in response to the U.S. bombing of Syrian state forces.
The Russian Foreign Ministry said in a statement that the deal was designed to prevent possible military incidents between the two great powers, which support opposing sides in the Syrian civil war.
Russia condemns the U.S. “illegitimate actions against the lawful Syrian government,” the Foreign Ministry said, referring to the U.S. bombing carried out in response to the alleged use of chemical weapons by the Syrian state military.
“Russia denies that the Syrian state military used chemical weapons, and maintains that Syrian militants were responsible for a recent chemical weapons incident in the north-western province of Idlib,’’ the Russian Foreign Ministry said.
U.S. President Donald Trump ordered missile strikes against the airfield from which a deadly chemical attack was launched, declaring he acted in America’s “national security interest” against Syrian President Bashar al-Assad.
The strikes drew sharp criticism from Russia, Assad’s ally. U.S. officials said the military fired dozens of cruise missiles against the base in response to the suspected gas attack in a rebel-held area this week, which Washington has blamed on Assad’s forces.
The Syrian government has strongly denied responsibility and says it does not use chemical weapons. The governor of Homs province said earlier that the airbase was used to support Syrian army operations against Islamic State.
The U.N. Security Council was expected to hold closed-door consultations on Friday about the U.S. strike on Syria following a request by Bolivia, an elected member of the council, a senior Security Council diplomat said.
Punch with additional report from Vanguard