Oil prices rose 3% on Tuesday as tensions in the Middle East escalated following the downing of a Russian fighter jet near the Syrian-Turkish border, and a weaker dollar provided an incentive for investors to buy more oil.
Brent futures for January were trading at a near two-week high of $46.23 a barrel at 2.20pm GMT, a 3% or $1.40 gain on Monday’s close. West Texas Intermediate (WTI) crude was up 1.25 cents at $43 a barrel, also a near two-week high.
“News of a military jet crashing in Syria is a reminder that there is still substantial risk in the Middle East,” said Bjarne Schieldrop, Olso-based chief commodities analyst at SEB.
Turkey said it had downed a Russian fighter jet near the Syrian border, saying it had repeatedly violated its air space, one of the most serious publicly acknowledged clashes between a Nato member country and Russia for half a century.
A weaker US dollar, easing from an eight-month peak against a basket of currencies, also lent support, as some investors found it cheaper to buy the dollar-denominated commodity.
They also awaited US crude stocks data, with expectations of a small increase.
US commercial crude oil stocks likely gained 1.1-million barrels in the week ended November 20, according to a preliminary Reuters survey of five analysts on Monday. A rise would mark a ninth consecutive weekly gain.
Some traders also prepared positions ahead of a long holiday weekend in the United States.
“There is likely to be a risk premium for the long Thanksgiving weekend,” said Olivier Jakob, oil analyst at Petromatrix in Zug, Switzerland.
Analysts at BNP Paribas said they expected US WTI crude futures to recover slightly this winter.
“We still think that a low 40s NYMEX WTI is a floor from which the market can rally through the winter,” they wrote in a research note.
“Thereafter, the summer of 2016 presents down-risk for oil prices as Opec pursues its current policy, US production stabilises and Iran delivers more barrels to the market.” Saudi Arabia led a shift by the Organisation of the Petroleum Exporting Countries (Opec) in November 2014 to defend market share against competing supplies, rather than cut output to prop up prices.
The Saudi cabinet said on Monday it was ready to cooperate with Opec and non-Opec countries to achieve market stability, days before Opec meets to review its policy.
Opec meets on December 4.
Saudi Arabia is unlikely to maintain its current strategy much longer as its budgetary deficit grows, analysts at Commerzbank wrote. “Saudi Arabia is being increasingly forced on to the defensive by the currently low oil prices.”
