Military Strikes in Syria Lower Oil Prices Below $72

Oil prices slid on Monday in international markets below the $72 mark as indications of increased U.S. production pushed fears of supply disruptions from the Middle East following military strikes in Syria to the background.

In London, the price of a barrel fell by 83 cents compared to the previous close, amounting to $71.75. In the U.S. market, barrels were traded at a price 78 cents lower, at $66.61.

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The United States, France, and Britain fired 105 missiles on Saturday at three locations in Syria, where the Syrian regime allegedly develops or stores chemical weapons. The action was intended to limit Syrian capabilities for producing chemical weapons and was presented as a response to an alleged chemical attack by Syrian regular forces on a rebel stronghold in Douma.

Syria is not a major oil producer, but the broader Middle East region is the leading exporter of crude oil in the world, and tensions in that area have caused nervousness in oil markets due to fears of supply disruptions.

At the beginning of the week, the prevailing belief in the market was that the military action by the U.S., Britain, and France was of a limited nature.

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– Regarding the events in Syria, traders were relieved that after the intervention by the U.S., France, and Britain, the conflict did not escalate, either diplomatically or on the ground, explains Harry Tchilinguirian from BNP Paribas.

20 Percent More Drilling Rigs

Traders thus began profit-taking today, and the focus is also on data from Baker Hughes, which showed that U.S. producers activated seven new drilling rigs last week. This brings their total number to 20 percent higher than in the same period last year.

The increased number of rigs signals further increases in U.S. production, which has already surpassed that of Saudi Arabia and is approaching Russia’s output of over 11 million barrels per day.

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U.S. shale oil producers are taking advantage of the space opened by the agreement of the Organization of the Petroleum Exporting Countries (OPEC) and a group of independent producers led by Russia to limit supply by 1.8 million barrels per day to bring global inventories down to a five-year average and thus support prices.

U.S. production has thus jumped about 20 percent since mid-2016. Separately, OPEC announced today that the price of a barrel of its oil basket on Friday was $69.29, which means it was 56 cents higher than the previous trading day.