Political anxiety affecting crude markets positively
April 16: Political issues are enhancing the anxiety of crude markets, with the US missile attack on Syria and the growing developments in North Korea contributing to it.
Last Tuesday, the North Korean state media warned the US of a nuclear attack at any sign of American aggression as a US Navy strike group steamed toward the western Pacific. For the first time on Saturday, it displayed its submarine-launched ballistic missiles (SLBM). In the meantime, US President Donald Trump tweeted North Korea was "looking for trouble" and the United States would "solve the problem" with or without China's help.
This did not help ease the geopolitical tension either. But developments pertaining to Syria hovered over the crude markets. Rising tensions in the oil-rich Middle East, supported by a shutdown at Libya's largest oilfield over the weekend, gave a fillip to anxiety in the markets. Oil prices rose from around $51.20 to about $52.60 upon news that the US military launched 59 missiles against an airbase in Syria after the Syrian government allegedly used chemical weapons in a rebel-held area.
However, markets also realised that one attack on Syria didn't alter the ground realities in the real sense.
One US air strike on Syria does not make an oil price crisis, Colin Cieszynski, chief market analyst for CMC Markets in Canada told Global News.
Markets in the meantime were also buoyed by the news from Russia that it would be 100 per cent in compliance with the terms of a production deal with the Organisation of the Petroleum Exporting Countries (Opec).
Russian Energy Minister Alexander Novak said at the very least full compliance to a cut of 250,000 bpd could come by the end of the month, possibly sooner. "We will deliver," he was quoted by Tass as saying.
Opec also slashed its output in March by more than the pledged. Production from 11 Opec members averaged 29.757 million barrel per day in March, an Opec report underlined. The current figures mean Opec production has fallen by more than its commitment, amounting to 104pc adherence to the supply cut regime. Even, including Nigeria and Libya, the two members exempted from the Opec output cut deal, production by all 13 Opec members in March fell to 31.939m bpd. That would be down 19,000 bpd from Opec's February output.
Reports by The Wall Street Journal last week said Saudi Arabia told Opec officials it wanted to continue the cuts to continue for an additional six months, also helped the markets.
In the light of all this, and with the refining maintenance season almost over, and, the summer driving season in North America about to commence, RBC Capital Markets Head of Commodity Strategy Helima Croft is of the opinion that crude oil prices will climb to the low $60s within months - a nearly 20pc move from current levels. Demand won't fall anytime soon, Croft insists. �Dawn