Oil gained after Russian air strikes in Syria drew condemnation from the US and its allies, increasing tension in the Middle East.
Futures in New York advanced as much as 2.2 percent. Russian planes are targeting Islamic State, al-Qaeda affiliated Nusra Front and other armed groups, Foreign Minister Sergei Lavrov said Thursday. US data Friday may show the labor market is improving in the world’s biggest oil user, with 201,000 jobs added last month, according to a Bloomberg survey.
“We need to start putting some geopolitical risk premium in the oil price,” Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, said in a note. “There are many countries active in some way in Syria and it is not yet clear how each will react to the increasing Russian open military action.”
Crude has stuck near $45 a barrel for more than four weeks after plunging to a six-year low in August even as U.S. crude stockpiles stay about 100 million barrels above the five-year seasonal average and OPEC pumps above its output target.
Oil holding steady in spite of bad news is usually a sign that a rebound is round the corner, said investor Jim Rogers.
West Texas Intermediate for November delivery gained as much as $1 to $45.74 a barrel on the New York Mercantile Exchange and was at $45.43 at 9:51 a.m. London time. The contract fell 35 cents to $44.74 Thursday. Prices are down 0.8 percent this week.
Brent for November settlement added 30 cents, or 0.6 percent, to $47.99 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $2.63 to WTI, the narrowest spread in a week.
Russian attacks in Syria raise the risk of incidents between Russian and U.S. jets, which are sharing airspace as they pursue separate bombing campaigns. While Russia insists that it has destroyed Islamic State targets, U.S. and French officials said the air strikes weren’t in areas controlled by the group. The U.S., U.K., France and Gulf nations have warned the strikes against the government’s opposition that have killed civilians risk fueling extremism.
“It seems risky to leave short positions open under growing political tension in the Middle East,” Tamas Varga, an analyst at PVM Oil Associates Ltd in London said. The Russian air strikes were already contributing to higher oil prices on Friday, he said.
Oil output levels reached a post-Soviet record in Russia last month as producers took advantage of the weak ruble to push ahead with drilling. Crude and condensate production rose to 10.74 million barrels a day, which surpassed a record set in June.
Eleven of 30 analysts and traders, or 37 percent, in a Bloomberg survey Thursday were bullish on WTI, while nine, or 30 percent, of the respondents were bearish on the futures. Ten of those surveyed were neutral on crude.