Oil prices reach 18-month high amid concern over Syria
BY MYRA P. SAEFONG and WILLIAM L. WATTS
SAN FRANCISCO -- Oil futures settled above $109 a barrel on Tuesday, buoyed by growing concerns over the potential for intervention by the U.S. and its allies in Syria and the possibility that the turmoil will spread to other parts of the oil-rich region.
Oil traders also awaited data on weekly U.S. petroleum supplies.
Crude oil for October delivery rose $3.09, or 2.9%, to settle at $109.01 a barrel on the New York Mercantile Exchange. Prices, which saw a 50-cent drop a day earlier, marked the highest close for a most-active contract since Feb. 24, 2012, according to FactSet data.
Likewise, October Brent crude rose $3.63, or 3.3%, to $114.36 a barrel on ICE Futures. It hasn't closed at a level that high since late February.
Traders worry that "the [Middle East] region could completely implode -- a concern magnified by the comments of Iran & Russia," said Matthew Parry, senior oil analyst at the International Energy Agency in Paris.
But "I think prices were already carrying a fairly large risk premium, and the latest rise only reflects an increase in concerns, not fresh worries per se," he said.
U.S. Secretary of State John Kerry said Monday that Washington was certain the Syrian government had used chemical weapons against civilians and added that "there must be accountability" for its actions.
Syria's government has denied the use of chemical weapons. Russia, China and Iran have warned against military intervention in Syria. According to BBC News, Russia said that such action would have "catastrophic consequences" for the region.
While Syria itself is a minor oil producer, one of the main worries is that an escalation of the conflict could hamper supply more broadly across the Middle East.
Syria borders on Iraq and oil traders are concerned that some of the conflict might spill over into Iraq, said James Williams, energy economist at WTRG Economics.
"It is not likely that anything will happen that would interrupt Iraqi oil production," he said. "It is like the concern about Egypt and the Suez Canal. The security around the canal makes it very unlikely that there would be an interruption of traffic through the canal, but the market always reacts to any conflict in the Middle East whether or not any oil is involved."
Meanwhile, energy investors were set to receive the first of two weekly U.S. supply reports later in the day, with the American Petroleum Institute's stockpile data for the week ended Aug. 23 due at 4:30 p.m. U.S. Eastern time.
Analysts polled by Platts expect to see a drop of 250,000 barrels in crude supplies.
Following Tuesday's API report, the Energy Information Administration was scheduled to release its own weekly supply data Wednesday at 10:30 a.m. Eastern time. The EIA data are generally seen as more definitive.
In other energy-futures trading Tuesday, September gasoline rallied by 8 cents for a 2.8% gain to settle at $3.03 a gallon. That was the highest close for a most-active contract since July 23.
On the supply side, analysts expected a 1.5-million-barrel drop in U.S. gasoline inventories for last week, according to Platts.
For distillates, including heating oil, the Platts survey tipped a 1-million-barrel rise.
September heating oil closed at $3.16 a gallon, surging 8 cents, or 2.7%, on Tuesday.
September natural gas tacked on 2 cents, or 0.6%, to $3.53 per million British thermal units. The contract is due to expire at the close of Wednesday's Nymex session.
Dow Jones Newswires