Oil prices hit new 2018 highs as missile strikes on top crude exporter Saudi Arabia added to the market’s worries about escalating conflict between the United States and Russia in Syria.
Brent, the benchmark for international oil prices, earlier climbed to its highest level in more than three years after President Donald Trump earlier warned Russia to “Get ready” for a U.S. missile attack on Syria, whose government Moscow has backed during its seven-year civil war.
The threat came after the Russian ambassador to Lebanon said his nation’s military would intercept American missiles and potentially target the U.S. craft that fired them. The potential American strike follows a suspected chemical attack on the rebel-held city Douma, allegedly by forces loyal to Syrian President Bashar Assad.
Brent crude prices were at $72.47 a barrel, up $1.43, or 2 percent from Tuesday’s closing price. The contract earlier rose to $73.09, the highest level since Nov. 28, 2014, when it hit $73.41.
U.S. West Texas Intermediate crude were up $1.54, or 2.4 percent, to $67.05, after touching $67.45, a session high going back to Dec. 4, 2014, when it touched $68.22.
John Kilduff, founding partner at energy hedge fund Again Capital, earlier on Wednesday said the number to watch from a technical level is U.S. crude’s previous 2018 high of $66.66.
“If we get through that we’re going to go to $70,” he said.
The morning price spike was completely due to the Trump tweet, which left the market to parse the president’s meaning, according to Kilduff. The question is whether he will order the military to solely target Syrian assets, or take aim at Iran, which also backs Assad and has a large presence in Syria.
Such an attack would come just one month before Trump faces a deadline that could see him restore sanctions on Iran, OPEC’s third largest oil producer.
“That’s the crux of the matter. Is it a pin prick or is it something that sets us up for escalation?” said Kilduff.
Saudi Arabia intercepted a ballistic missile launched by Yemen’s Houthis towards the southern city of Jizan, Saudi-owned broadcaster Al Arabiya TV said on Wednesday. Al Arabiya said earlier that Saudi air defence forces had intercepted a missile over Riyadh after at least three blasts were heard in the capital.
The Houthis targeted Saudi Arabia’s defense ministry in Riyadh with ballistic missiles on Wednesday, the armed group’s Al Masirah TV said on Twitter.
The headlines followed reports that Houthi rebels in Yemen had launched a drone strike on a facility owned by Saudi Aramco, the kingdom’s national oil giant.
The Saudi-led invasion of Yemen has contributed to oil’s geopolitical risk premium, as Houthis target Saudi oil assets. Last week, the Houthis attacked a Saudi oil tanker.
The new records came despite government data showing U.S. crude stockpiles rose unexpectedly and American crude production continued to hit new highs.
U.S. commercial crude inventories rose by 3.3 million barrels in the week through April 6.
Analysts in a Reuters survey had anticipated a decline of 189,000 barrels a day. Figures released Tuesday afternoon by industry group the American Petroleum Institute had suggested crude stocks rose by 1.8 million barrels a day.