Crude oil futures continues uptrend amid rising Middle East tensions

05:14' PM - Thursday, 12/04/2018

Crude oil futures were higher during mid-morning trade in Asia Thursday, amid rising tensions in the Middle East after Saudi Arabia intercepted a missile over Riyadh and US President Donald Trump warned of an attack on Syria.

At 11:20 am Singapore time (0320 GMT), June ICE Brent crude futures were up 26 cents (0.36%) from Wednesday's settle at $72.32/b, while the NYMEX May light sweet crude contract was 32 cents/b (0.48%) higher at $67.14/b.

Saudi Arabia's air defenses on Wednesday intercepted a missile over Riyadh launched by Yemeni Houthi militants, and also shot down a Houthi scout drone targeting an airport in the southwestern city of Jizan, according to Al Arabiya.

Meanwhile, on Syria, Trump took to twitter early Wednesday, saying that missiles "will be coming, nice and new and 'smart!'" Trump also warned Russia not to side with Syrian President Bashar al-Assad, whose forces allegedly carried out a chemical weapons attack against civilians April 7. "You shouldn't be partners with a Gas Killing Animal who kills his people and enjoys it!" Trump wrote on Twitter.

"Geopolitics continues to grip the market," ANZ analysts said in a note Thursday, referring to the tensions in the Middle East.

"Fundamental data are dominated by politics," Commerzbank analysts said in a note Wednesday. "The focus is on the West's probable military strike against the Syrian regime, though all that presumably remains to be discussed is its intensity and the composition of the coalition," they added.

Both benchmark futures contracts touched three-year highs during Wednesday's trading session, in reaction to the Middle East tensions.

Support also came from Saudi Arabian energy minister Khalid al-Falih's comments on Wednesday vowing that OPEC and its key oil producer allies will continue to manage the markets to avoid a repeat of the global oil supply glut which caused prices to tank in 2014.

Saudi Arabia and Russia are leading discussions on extending the OPEC/non-OPEC coalition's alliance "to monitor the market and take action where necessary to maintain stability, which is good news for producers and consumers," Falih said at a media briefing at the International Energy Forum in New Delhi on Wednesday.

With rising geopolitical tensions, a bearish report on US inventory data from the Energy Information Administration on Wednesday failed to catch much market attention, analysts said.

Data released by the EIA showed that US crude stocks were up 3.306 million barrels to 428.638 million barrels the week ended April 6, while analysts surveyed Monday by S&P Global Platts were looking for a build of 100,000 barrels for the same period.

"Geopolitical risks outweighed an unexpected rise in inventories in the US," ANZ analysts said. - Platts -

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