Crude Oil Price Hits $72, Highest in Three Years over Tension in Middle East

Crude oil price on Wednesday  hit $72 per barrel, the highest in more than three years after Saudi Arabia said it intercepted missiles over Riyadh, worsening the Middle East tension.

Also comments by the United States President, Donald Trump, who  warned Russia on Wednesday that missiles “will be coming,” in Syria after a suspected chemical attack, also affected the global oil market.

Reuters reported that the fallout from new US sanctions on Moscow have rattled investors and fears of military action were stoked after one of Russia’s ambassadors reiterated it would shoot down any US missiles fired at Syria.

Trump, who has criticised Russia for standing by Syrian President Bashar al-Assad, shot back in a message on Twitter early on Wednesday.

“Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and ‘smart!’,” he wrote in the post. “You shouldn’t be partners with a Gas Killing Animal who kills his people and enjoys it!”  he added.

With these tensions, oil prices hit their highest in more than three years after Trump’s latest comments.

United West Intermediate (WIT) crude rose 2.43 per cent to $67.10 per barrel and Brent was last at $72.50, up 2.06 per cent on the day.

Crude oil prices began to climb on Trump’s warning over Syria, then rallied further on a report that Saudi Arabia’s air defense forces intercepted a missile over the capital Riyadh.

The prices last Friday suffered their worst weekly declines in two months after they had followed equity markets lower amid growing fears of a trade war between the US and China, the world’s two largest economies.
But on Monday, crude oil tracked global stock prices higher on signs over the weekend that President Donald Trump’s administration might be softening its stance in the trade spat with China.
However, remarks from China’s foreign ministry and a tweet from Trump have suggested that the dispute could easily heat up again.

Crude oil price on Tuesday hit over $70 as the trade war between the United States and China appeared to ease.
The price had on January 25, 2018 hit $71, its highest since December 2014.
After falling from an all-time high of $147 per barrel in July 2008, Brent crude price had hit a peak of $115 per barrel in June 2014 before the excess inventory in the oil market forced the price down to $27 per barrel in February 2016.

WTI also reached a peak of $105 per barrel in June 2014 before the sharp drop in oil prices.
However, a production-cutting pact between the OPEC, Russia and other producers has given strong tailwind to oil prices.
OPEC’s main objective for the cuts is to eliminate a global surplus in oil stocks and re-balance the market.

OPEC, together with Russia and a group of other producers, last November extended an output-cutting deal to cover all of 2018.

The cartel had at their November 30, 2017 meeting agreed to extend oil output cuts until the end of 2018 as part of the global efforts to eliminate excess oil supply that had dogged oil markets since 2014.

The current deal, under which OPEC and non-OPEC producers are cutting supply by about 1.8 million barrels per day, expires in March 2018.

OPEC is cutting output by even more than it promised and the restraint is reducing oil stocks globally, a trend most visible in the United States, the world’s largest and most transparent oil market.