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Oil Services ETF Breaks Out as Syria Crisis Escalates


The oil services exchange traded fund is breaking out after Russia stepped in, reportedly backing Syria in case of U.S. military intervention.

The Market Vectors Oil Services ETF (OIH) was up 1.2% Friday, trading just below $47 and testing its 52-week high. OIH increased 20.1% year-to-date. [Oil ETFs Threatening to Break Out on Syria]

West Texas Intermediate crude oil futures were up 1.9% Friday, trading around $110.4 per barrel. [Oil Prices Lift Energy Explorer and Producer ETFs]

Oil prices and energy sector stocks rose after President Vladimir Putin stated that Russia will continue to support Syria if the U.S. launches a strike against the country in response to alleged the chemical weapon deployment.

“Will we help Syria? We will,” Putin said, Bloomberg reports.

“The involvement by Russia could escalate things and take it beyond Syrian borders,” Kyle Cooper, director of commodities research at IAF Advisors, said in a separate Bloomberg article. “The situation in Syria is fluid and that has the market concerned.”

The Middle East made up about 35% of global oil production in the first three months of the year.

“Geopolitical issues have elevated both WTI and Brent,” said Michael Peterson, managing director and senior equity analyst at MLV & Co. in Houston. “It’s in no one’s interest to see this spiral out of control.”

Along with short-term volatility associated with Middle East geopolitical risks, the Market Vectors Oil Services ETF helps capture the long-term play on the energy industry as oil becomes increasingly harder to extract.

“The incremental barrel of oil being produced is increasingly coming from areas (deep water, oil shale, the Arctic) that demand more services expertise and technology,” according to Morningstar analyst John Gabriel. “Such a dynamic supports healthy long-term industry trends and pricing power.”

Market Vectors Oil Services ETF

Chart source: Michael Batnick

For more information on crude oil, visit our oil category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.