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Oil brushes $111 as Syria strike fears rise
MADRID (MarketWatch) — Syria was the central focus for oil markets early Wednesday, with futures pushing 2% higher in electronic trade despite bearish U.S. supply data and as one investment bank said Brent crude could surge as high as $150 a barrel amid the crisis.
U.S. crude oil for October delivery CLV3 +1.14% added another $1.54, or 1.4%, to hit $110.55 a barrel after surging almost 3% Tuesday on the New York Mercantile Exchange. But the contract has tapped $111 a barrel and even went over $112 a barrel at one point.
Reuters
The possibility of U.S. intervention in the Syrian civil war sends oil futures surging.
The Nymex crude contract hasn’t traded above $110 a barrel in more than two years, and it’s been at least that long since the contract was above $111, according to FactSet data. The last time oil was at that level was in March 2011.October Brent crude UK:LCOV3 +1.43% also extended gains, rising $1.31, or 1.1%, to $115.62 a barrel, building on Tuesday’s 3.3% rally.
The gains continued a sharp upward trend after U.S. Secretary of State John Kerry said Monday that Washington believed the Syrian regime had used chemical weapons against civilians.
With the U.S. weighing a possible strike against Syrian government, the Arab League on Tuesday called for an international response to the alleged gas attack on civilians, though they didn’t specifically endorse a unilateral U.S. action.
Meanwhile, a Syrian opposition coalition said in a statement Tuesday that the government had used phosphorus and napalm bombs against civilians in rural Aleppo a day earlier, Reuters reported, adding the claims couldn’t be verified.
Société Générale’s global head of oil research Michael Wittner wrote in a note Tuesday that under the bank’s base-case scenario, in which an attack begins in the next week, Brent crude could rise by another $5 to $10, sending it to the $120-$125 a barrel level.
Under SocGen’s “upside scenario,” which includes “a significant supply disruption in Iraq or elsewhere,” Brent could hit $150.
However, Wittner added that any price spikes likely wouldn’t last, as Saudi Arabia could make up for the supply disruptions, and many oil-importing nations have strategic reserves they could use.
Rivkin global analyst Tim Radford agreed that the gains were temporary but was more dismissive of the odds of a U.S. strike.
“It really is worst-case-scenario-type fear driving oil prices higher. And while the global press have been talking up a likely military strike by the West, it remains unlikely given the extremely sensitive nature of Syria’s political relationships,” Radford early wrote in a note early Wednesday.
“Once certainty is restored by political leaders over the next few days, we should see speculative and fear-driven buying subside, leading to [Nymex] oil prices returning to levels prior to the U.S. Secretary of State John Kerry address on the Syrian chemical attacks, at around $107 a barrel,” Radford wrote.
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