Oil Retreats From Three-Year High as Syria Tensions Simmer
April 16 2018 - 11:53AM
Dow Jones News
By Christopher Alessi
Oil prices retreated Monday from a three-year high reached at
the end of last week, as geopolitical risks to supply receded.
Light, sweet crude for May delivery fell 84 cents, or 1.3%, to
$66.55 a barrel on the New York Mercantile Exchange. Brent, the
global benchmark, fell 81 cents, or 1.1%, to $71.77 a barrel.
Oil prices closed at the highest level since December 2014 on
Friday, ahead of U.S.-led military strikes in Syria. But prices
reversed course Monday after relatively restrained airstrikes
didn't appear to escalate tensions with the Syrian regime and its
allies such as Russia.
"We can understand why the oil price has tended to fall rather
than gain today in response to the West's military strike against
Syria -- after all, the tough response announced by Russia has
failed to materialize," analysts at Commerzbank argued. "Most
importantly, however, the escalation of the situation had already
been priced in beforehand," they added.
Still, geopolitical risk emanating from the Middle East has "by
no means evaporated, and could soon ignite a renewed price rally"
if the U.S. were to move to reimpose economic sanctions on Iran,
the analysts wrote in a note Monday.
Stephen Brennock, an analyst at brokerage PVM Oil Associates
Ltd., said Monday that "underpinning this [price] retreat is a
consensus that there will be no further occurrences of U.S.
military action in Syria." But, he added, "as much as the
geopolitical risk premium may be taking a breather, oil prices will
continue to be subjected to Trump's whims for the foreseeable
future."
The flurry of geopolitical activity came on the heels of a
warning Friday from the International Energy Agency that global
demand for oil could be dented by escalating trade tensions between
the U.S. and China. The Trump administration's planned tariffs on
Chinese imports and retaliatory measures announced by Beijing would
weigh on the global economy, with "strong consequences for oil
demand," the agency said.
However, the IEA reiterated its global demand growth estimate of
1.5 million barrels a day for 2018.
Oil market observers are looking ahead to weekly data Wednesday
on U.S. petroleum inventory levels from the Energy Information
Administration.
Gasoline futures fell 1.1% to $2.0422 a gallon, and diesel
futures declined 0.9% to $2.0814 a gallon.
Write to Christopher Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
April 16, 2018 11:38 ET (15:38 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.