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Oil prices drop as fears about Syria strikes fallout wane

Reuters  |  LONDON 

By Cooper

LONDON (Reuters) - fell nearly 2 percent on Monday after U.S. drilling activity rose and fears waned about escalating tensions in the following air strikes on over the weekend.

The United States, and Britain launched 105 missiles on Saturday, targeting what they said were three in in retaliation for a on April 7.

The price had risen nearly 10 percent in the run-up to the strikes, as investors bulked up on assets, such as gold or U.S. Treasuries, that can shield against geopolitical risks.

By 0851 GMT on Monday, Brent futures slipped $1.34 to $71.24 a barrel, while U.S. crude futures were down $1.16 at $66.23 a barrel.

"As far as developments in are concerned, the market has had a sigh of relief in the sense that there is no escalation, either diplomatically, or on the ground, following the intervention by the U.S., and the UK," said

"As a macro asset-allocator, if you want to hedge your portfolio against geopolitical risk, your prime candidate is oil, especially if that risk is in the "

Although Syria itself is not a significant oil producer, the wider is the world's most important crude exporter and tension in the region tends to put on edge.

"Investors continued to worry about the impact of a wider conflict in the Middle East," said.

Fund managers hold more Brent futures and options than at any time since records began in 2011, according to data from the

Investors have added to their bullish positions in Brent, which now equal nearly 640 million barrels of oil, in nine out of the last 10 months, in part thanks to the premium of the front-month futures contract over those for delivery at a later date, known as "backwardation".

Backwardation makes it profitable to retain a bullish position in

Aside from a flurry of profit-taking after the air strikes, oil also came under some pressure from another rise in U.S. drilling activity.

U.S. companies added seven rigs in the week to April 13, bringing the total to 815, the highest since March 2015, and nearly 20 percent higher than a year ago, services firm said on Friday.

Despite this, Brent is still up more than 16 percent from its 2018 low in February.

(Additional reporting by and in Singapore; Editing by Edmund Blair)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, April 16 2018. 14:51 IST