Oil Surges to 2-Week High as Trump Pledges Syria Missile Attack

Oil surged to a two-week high in New York as President Donald Trump told Russia in a tweet to “get ready” for U.S. missiles to be fired at Syria.

Futures in New York rose as much as 1.3 percent after climbing the most in eight months on Tuesday. President Donald Trump has intensified preparations for a response to a suspected chemical weapons attack in Syria, a move that could place the U.S. in direct conflict with Russian forces. While the Middle East country’s own oil production is limited, prices often respond to the risk of war in a region that holds almost half of the world’s crude reserves.

Oil has seesawed this year as record output from American producers offsets cuts by the Organization of Petroleum Exporting Countries and its allies aimed at eliminating a global oversupply. While the market has focused on U.S. crude inventory data for signs on whether the OPEC cuts are working, political premium has returned to oil prices with risks from tensions in the Middle East and a potential trade war between America and China.

Focus on West

“The focus is on the West’s probable military strike against the Syrian regime,” said Carsten Fritsch and Eugen Weinberg, analysts at Commerzbank AG in Frankfurt.

West Texas Intermediate for May delivery was at $66.17 a barrel on the New York Mercantile Exchange, up 66 cents at 12:24 p.m. in London, after climbing $2.09 on Tuesday in the biggest jump since late July. Total volume traded on Wednesday was about 73 percent above the 100-day average.

Brent for June settlement was at $71.67 a barrel on the London-based ICE Futures Europe exchange, up 63 cents, after rising $2.39 on Tuesday. The global benchmark crude traded at a $5.57 premium to June WTI.

Yuan-denominated futures for September delivery rose 2 percent to 418.20 yuan a barrel on the Shanghai International Energy Exchange.

For the second time in less than a year, Trump is weighing a military response to a gas attack in Syria. This time, he’s under pressure to hit harder and take bigger risks. The attack Trump ordered last year was limited to a single base and left little lasting damage. A new retaliatory strike will almost certainly inflict greater damage and probably hit more targets important to President Bashar al-Assad’s regime.

Other oil-market news:

U.S. crude inventories increased by 1.76 million barrels last week, the American Petroleum Institute was said to report. That’s in the opposite direction of a 1.25 million-barrel decrease estimated in a Bloomberg survey before the Energy Information Administration’s data due Wednesday. OPEC’s supply cut deal with allies took almost a year of bargaining and brinkmanship. By year-end, the group may have lost the same amount of crude unintentionally. Saudi Arabia is said to want oil prices near $80 a barrel to pay for the government’s crowded policy agenda and support the valuation of state energy giant Aramco before an initial public offering. Eurocontrol, an air traffic agency in Europe, asked airlines to apply caution on flights to the eastern Mediterranean region because of possible air strikes in Syria over the next 72 hours. U.S. oil and gas producers expect their borrowing ability to increase over the next few months, leaving them open to invest in new shale assets, particularly the Eagle Ford in Texas.