Some market watchers see new highs for oil if international geopolitical tensions fail to ease in coming days.
In its third-straight day of gains, crude oil rallied on Wednesday to its highest level since late 2014. The rally came on the heels of international geopolitical unrest surrounding Syria, Russia and action the Trump administration may take.
Oil prices declined Thursday morning after President Donald Trump signaled in a tweet that a U.S. strike on Syria for its alleged chemical weapons use “Could be very soon or not so soon at all!” West Texas Intermediate was trading above $66 a barrel.
Before the tweet, Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management, said crude oil prices faced a confluence of factors that may send it to new highs. Here are his reasons why.
• Escalating geopolitical unrest in the Middle East, paired with inventory data released Wednesday morning, have boosted crude oil.
• If the U.S. does indeed launch missiles at Syria, this would heighten risk and likely at once push crude oil higher and depress equities further.
• If that were to occur, crude oil would likely spike over $70 per barrel, and investor sentiment would sour.
• As these kinds of geopolitical tensions tend to have minor long-term market impact, one indicator to watch heading into week’s end to gauge how investors are feeling is the University of Michigan’s consumer sentiment survey due out Friday morning.