Turkey and Syria Drive Oil Prices

Turkey and Syria Drive Oil Prices
Turkey and Syria Drive Oil Prices
On Tuesday morning WTI crude oil is trading on a positive bias but flat to Monday’s close. WTI crude traded near the highest price in more than 4 months at 98.07, before a government report that will probably show U.S. stockpiles declined and refinery rates increased. The dollar strengthened against the majority of its 16 most traded counterparts amid speculation about when the Federal Reserve will begin to taper its monetary stimulus.

Geopolitical tensions are the only supporting factor for crude oil which is trading well above its expected range. Crude oil futures hit a 9-month high near $99 per barrel, but reversed gains to close lower, as investors turned cautious ahead of the start of the US Federal Reserve’s two-day policy committee meeting on Tuesday. Brent crude oil futures touched a 10-week high of around $107 per barrel, as tensions in the Middle East rose, but prices finished slightly lower for the day after a late sell-off in US gasoline futures.

Syria on Monday dominated the start of the Group of Eight summit in Northern Ireland amid fears of a broader Middle East conflict. Prices jumped last week after US officials said they had evidence of the use of chemical weapons by forces backing Syrian President Bashar al-Assad and signaled that Washington could begin arming the opposition. Concern over events in Turkey, which warned on Monday that it may bring in the army to help quell nearly three weeks of nationwide anti-government protests helped add to the volatility of crude oil.  Tensions between the U.S. and Russia over the Syrian Civil War helped boost oil prices. The U.S. West Texas Intermediate benchmark rose as high as $98.74 a barrel in intraday trade, clearing a February high and hitting its highest mark since September.

Data due out later today are projected to show U.S. commercial crude-oil stocks declined 1 million barrels for the week ended June 14, according to a survey of analysts. The decline is expected to stem from a reduction in crude-oil imports, which have been volatile recently.

The American Petroleum Institute is scheduled to issue its weekly report. More closely watched figures from the U.S. Energy Information Administration (EIA) are due tomorrow.

A drawdown of 1 million barrels would be “more than double seasonal norms,” with the EIA’s five-year average showing oil stocks typically fall by about 400,000 barrels during this reporting period, according to Platts. Reports on crude-oil inventory released last week were bearish, with both the API and EIA reporting supply increases, even as analysts had expected no change in inventory levels.

Natural gas seems to be overshadowed by political tensions and the FOMC meeting and remains flat at 3.889 subject to the whims of the weather forecasts. Natural gas futures rose almost 4%, lifted by forecasts for hot weather in the coming weeks and a possible tropical storm in the Gulf of Mexico.

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