Oil price impact of U.S. strike in Syria depends on scope of conflict

Oil prices on Friday pared gains after the U.S. missile strike against a Syrian air base sent prices up 2.4 percent to nearly $53 a barrel overnight.

The U.S. crude benchmark edged down to $51.93 a barrel early Friday, in a sign that traders, at least for now, don’t expect the conflict to have a marked impact on Middle East oil or spread beyond Syria, which only producers a small amount of oil.

Markets also reacted to a U.S. jobs report that showed employers hired fewer workers than expected in March.

Geopolitical tensions tend to push oil prices higher, but analysts said the missile strike would only have a lasting impact on the oil market if the United States pursued broader intervention in Syria and the region.

“The impact is quite muted because Syria simply isn’t a player in the world oil market,” said Andy Lipow, president of Lipow Oil Associates in Houston.

A bigger concern for the oil market is the Trump Administration’s new flexibility on the question of intervention in the Middle East. There’s a risk that “a more aggressive attitude in the administration could eventually lead to more tension with Russia and Iran,” Lipow said.

Still, international oil producers aren’t well prepared for a major geopolitical conflict in the Middle East that actually does hamper the flow of crude. OPEC’s spare capacity – the amount of oil the cartel could produce in the event of a sudden shortage – is around 3 percent of global oil demand, said Bill Herbert, an analyst at Piper Jaffray, in a note to clients.

“The oil markets continue to be blithely dismissive of the fragility of the global oil order and the incendiary state of geopolitics, especially in the Middle East,” Herbert said.

Still, recent oil production cuts by OPEC since January mean these producers have more than 1 million barrels a day that could come back online relatively quickly.