Oil Prices Rise Amid Russia-Turkey Clash and Weakening U.S Dollar

'News of a military jet crashing in Syria is a reminder that there is still substantial risk in the Middle East,' explains analyst.

A still from a video showing a plane falling in flames near the Turkish-Syrian border.
Screenshot

REUTERS - Oil prices rose on Tuesday as tensions in the Middle East escalated following the downing of a Russian-made fighter jet near the Syrian-Turkish border, and a weaker dollar provided incentive for investors to buy more oil.

Brent futures for January LCOc1 were trading more than $1 higher at 1240 GMT at an intra-day high of $45.85 a barrel, a 2-percent rise on Monday's close. West Texas Intermediate crude CLc1 was up 75 cents at $42.50 a barrel.

"News of a military jet crashing in Syria is a reminder that there is still substantial risk in the Middle East," said Bjarne Schieldrop, Oslo-based chief commodities analyst at SEB.

Turkey said it had downed a Russian-made fighter jet near the Syrian border after it violated Ankara's airspace, the first time a NATO member has downed a Russian or Soviet military aircraft since the 1950s.

A weaker U.S. 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 U.S. crude stocks data, with expectations of a small increase.

U.S. 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 U.S. 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, U.S. production stabilizes and Iran delivers more barrels to the market," they added, referring to the Organization of the Petroleum Exporting Countries.

Saudi Arabia led a shift by 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 on December 4.

Saudi Arabia is unlikely to maintain its current strategy much longer as its budgetary deficit grows, said analysts at Commerzbank.

"Saudi Arabia is being increasingly forced on to the defensive by the currently low oil prices," they said.