Crude oil dipped more than 1% to trade near $66.7/bbl Monday after a stupendous 8.6% rally last week. Crude oil rallied sharply last week on supply concerns fuelled by geopolitical tensions in Middle-east.
Crude tested the highest level since December 2014 as tensions escalated between US and Russia on back of Syria. Syria is a marginal crude oil production with production about 20,000 barrels per day in 2017. However, Middle-east is a major oil producing region and tensions in the region results in some risk premium. Tensions in region are high also due to ongoing spat between Saudi Arabia and Yemen and uncertainty about Iran’s nuclear deal as US threatens to pull out.
The United States, France and Britain launched 105 missiles on Saturday, targeting three chemical weapons facilities in Syria in retaliation for a suspected poison gas attack in Douma on April 7. Russia has warned US and others of severe consequence for the strikes.
Crude’s rally is however being challenged by higher US supply. US crude production stands at record high level of 10.525 million barrels per day. The number of rigs drilling for crude oil rose to 815 rigs last week, the highest since March 2015, showing higher production interest.