US airstrike in Syria boosts crude oil prices

By Ma Jingjing Source:Global Times Published: 2017/4/9 19:53:40

Uncertainties cause turbulence in foreign exchange markets: analyst

The US airstrike on Syria will boost international oil prices in the short-term, while foreign exchange markets will experience some turbulence due to growing uncertainty, analysts noted following a surge in the prices of crude and safe-haven assets such as gold, silver and the Japanese yen in wake of the attack.

The US launched dozens of Tomahawk cruise missiles at a Syrian government airbase on Friday, in response to calls for a display of force following a suspected chemical weapons attack in Syria on Tuesday.

Oil and safe-haven assets reacted strongly to the strike. Brent inched up $0.35 to close at $55.24 a barrel on Friday, down from a session high of $56.08, Reuters reported.

US West Texas Intermediate (WTI) crude oil futures rose $0.54 to $52.24 a barrel on the same day, according to the Reuters report. WTI crude oil futures reached a session high of $52.94, shortly after the US missile attack was announced, the report said.

The US attack has aided oil prices in the short term, but price fluctuations will be normal this year because ongoing bearish factors are unlikely to change, said Ren Zeping, chief economist at Beijing-based Founder Securities.

According to Ren, oil prices may drop due to rising output and high inventories. He argued that it remains highly uncertain whether the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers such as Russia will hold to the output cut agreement they reached in November 2016 because the largest member of OPEC, Saudi Arabia, has already reversed some of the cuts it made in February. "The attack may make members less willing to cut oil output," he told the Global Times on Sunday.

International gold prices rose to $1,270 an ounce from $1,250 an ounce shortly after the attack. The number of transactions for six-month gold contracts on the COMEX division of the New York Mercantile Exchange jumped to 21,873 just 15 minutes after the attack, noted Zhou Yinghao, a senior analyst at the Beijing Gold Exchange Center.

The stances of Russia and the US on the Syrian issue will influence the price of gold in the short term, Zhou told the Global Times on Sunday.

If the US toughens its stance, the price of gold could reach $1,300 due to geopolitical tensions, he said. "If not, the price of gold will definitely drop," he noted.

It is inevitable that there will be some turmoil in the foreign exchange markets, noted Ren.

The US attack affirmed our prediction that the US dollar index will reach or surpass 110 by the middle of the year, Ren said. The yuan will remain stable against the dollar and revert to the depreciating trend of the last two years, he said.

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