Oil prices rose yesterday as tensions in the oil-rich Middle East escalated following the downing of a Russian-made fighter jet near the Syrian-Turkish border and a weaker US dollar provided incentive for investors to buy more oil.
Brent futures for January were up 67 cents to $45.50 a barrel at 0909 GMT, up 1.5% on Monday’s close. West Texas Intermediate (WTI) crude was up 68 cents at $42.43.
“News of a military jet crashing in Syria is a reminder that there is still substantial risk in the Middle East,” said Bjarne Schieldrop, the Olso-based chief commodities analyst at SEB.
Turkey said it had downed a Russian-made fighter jet near the Syrian border after it violated Ankara’s airspace.
A weaker US dollar, easing from an eight-month peak against a basket of currencies, also lent support as investors found it cheaper to buy the dollar-denominated commodity.
They also awaited US crude stocks data, with expectations of a small increase.
US commercial crude oil stocks likely gained 1.1 million barrels for the week ended Nov 20, according to a preliminary Reuters survey of five analysts on Monday.
A rise would mark a ninth consecutive weekly gain.
“We still think that a low 40s NYMEX WTI is a floor from which the market can rally through the winter,” said BNP Paribas said in a research note.
“Thereafter, the summer of 2016 presents down risk for oil prices as OPEC pursues its current policy, US production stabilises and Iran delivers more barrels to the market.”
Saudi Arabia led a shift by the Organization of the Petroleum Exporting Countries (OPEC) in November 2014 to defend market share against competing supplies, rather than cut output to prop up prices.
Analysts said the impact of comments by the Saudi Arabian oil minister, that his country was prepared to work with other oil producers to stabilise prices, was muted because there was no firm signal to slash production to ease the global glut.
The market will be closely watching the gathering of the Organization of the Petroleum Exporting Countries (OPEC) next month for firm announcements on the cartel’s lofty production levels, analysts added.
“There was no concrete signal from the Saudi oil minister’s remarks that OPEC will cut back on production, so the impact is limited,” said Daniel Ang, an investment analyst with Phillip Futures in Singapore.
“If there had been such a signal, prices would be shooting up much higher right now.”
He said markets were waiting for the OPEC meeting to see if the cartel “really means business” and starts trimming production.
The Saudi cabinet said on Monday it was ready to cooperate with OPEC and non-OPEC countries to achieve market stability, days before OPEC meets to review its policy.
BMI Research said slower growth in emerging markets was helping keep prices low.
“Prices will struggle to recover, with lacklustre demand lagging global supply. Diesel is the most exposed from weaker growth, an economic rebalancing in China and the slowdown in global trade,” it said in a market commentary.