WTI at nine-month high on weak dollar and Syria war concern

Oil prices surged to nine-month high levels on Friday, supported by weaker dollar and concern over the war in Syria. The U.S. currency has been pressured throughout the week by its major counterparts, driving commodity prices up. The greenback remained fairly unchanged even after positive U.S. data on Thursday and somewhat controversial figures, published on Friday. In the Middle East, Syrian rebels will be provided with U.S. weapons as Barack Obama authorised shipments for the first time.

Industrial Production in May mismatched forecasts of a 0.2% increase and instead remained unchanged, compared to a revised 0.4% decline for the preceding month. Capacity Utilization couldnt outperform expectations and stood at 77.6%, 0.3% lower than forecast and below Aprils revised reading of 77.7%. Treasury International Capital for April rose to 12.7 billion USD, up from 2.1 billion dollars during the preceding period. U.S. current account deficit for Q1 reached 106.15 billion USD, surpassing forecasts of an increase to 111.30 billion USD, but higher than last quarters 102.32 billion dollars. Core PPI both on annual and monthly basis for May met expectations at 1.7% and 0.1% gain respectively. Annual Producer Price Index surpassed projections of a 0.1% jump to reach 0.5%, well above Aprils 0.6% increase reading. PPI on a monthly basis jumped to 0.5%, surpassing expectations of 0.1% and way above Aprils 0.7% decrease. Unexpected rise of prices spurred concern about inflation, which immediately resulted in a jump of gold and oil prices as a hedging strategy against inflationary effects. Gold went above the $1 390 mark and WTI traded above $98 per barrel, minutes after the data was published.

On the New York Mercantile Exchange, WTI for July delivery stood at $97.85 a barrel, up 1.17% on the day. Prices hit a days high earlier at $98.25 per barrel and low of $96.43.

Brent oil for August delivery went above $106 a barrel and stood at $106.16 at 13:39 GMT. The European benchmark surged 1.15% on the day and varied between days high of $106.42 and low at $104.47.

Guy Wolf, global head of market analytics at Marex Spectron Group in London said for Bloomberg: “The U.S. recovery has been consistent for a while now. It’s not booming, but it is sustained. Oil prices are reasonably well supported at these levels. However, markets have been wedded to stimulus for some time now.”

Meanwhile, civil war in Syria lays concern that the conflict might drag other countries, thus involving the whole oil-producing region, which could destabilize the global oil market.

Olivier Jakob, Petromatrix analyst said for Reuters: “Crude oil has been trading in a range for more than a month … With the escalation in Syria, the buying on the dips is probably going to be stronger as the geopolitical premium needs to be increased.”

For the first time Barack Obama authorised a shipment of U.S. weapons to Syrian rebels, saying that he had proof the Syrian government used chemical weapons against rebels.

Richard Mallinson, a consultant at Energy Aspects, commented for Reuters: “Were seeing the Syrian situation worsen … all the foreign backers are upping their stakes in Syria and none of them can really be sure what the consequences will be.”