Oil surges as China calms trade war jitters

Oil surges as China calms trade war jitters

Oil prices hit their highest level since early December 2014 after United States President Donald Trump warned Russian Federation to prepare for a strike on its ally, Syria.

These bullish factors more than offset pressure from a USA government report showing crude oil inventories C-STK-T-EIA rose by 3.3 million barrels, while production C-OUT-T-EIA hit a record 10.53 million barrels per day (bpd).

They have traded as high as $67.45 on Wednesday, a level last seen in December 2014.

Brent crude futures were at $72.33 per barrel at 0648 GMT, up 27 cents, or 0.4 percent from their last close.

Is the recent rise in crude oil prices above $70 a barrel a temporary phenomenon because of a fresh round of geopolitical tensions in West Asia?

Concerns over a possible trade war between the two largest economies contributed to a more than four percent decline in the prices of both oil benchmarks last week.

Talk of Middle East conflicts has overshadowed bearish EIA data.

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Russian Federation didn't specify who would be involved but said it couldn't rule out a war between the US and Russian Federation. Defense Secretary James Mattis strongly urged the president during a meeting on Thursday to rethink his attack on Syria .

The market is also keeping an eye on developments out of Syria, after reports an air base near Homs was struck by missiles.

Crude oil markets have been heating up and this has reflected in fuel prices in India with petrol touching 4-year highs and diesel also at all-time highs. Brent crude oil, the global benchmark, was trading at $72.30.

While the Organization of the Petroleum Exporting Countries has continued to cut its crude-oil output, the cartel said in its monthly market report that non-OPEC producers such as the US are contributing to rising global supply.

In US equity markets, the Dow Jones felt the pinch of the tensions falling 0.9% to 24,189 points on Wednesday while the S&P 500 also dropped 0.6% to 2,642 points.

"Oil markets are getting a bounce on increasing speculation about Trump and Syria", Streible said.

John Kilduff, founding partner at energy hedge fund Again Capital, earlier on Wednesday said USA crude prices could be heading to $70 after breaking through the previous 2018 high of $66.66.

"Geopolitical risks outweighed an unexpected rise in inventories in the US", ANZ bank said on Thursday. The US Energy Information Administrations still expects production to total 10.7 million barrels a day this year - a record.

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