Oil rises above $98 on fears over Syria
BY VICTOR REKLAITIS AND SARA SJOLIN
NEW YORK -- Crude-oil futures advanced on Monday as investors continued to worry that violence in Syria could spread to other countries in the oil-rich Middle East.
Crude for July delivery (CLN3) added 16 cents, or nearly 0.2%, to $98.01/bbl on the New York Mercantile Exchange.
Oil briefly climbed as high as $98.74 in electronic trading, touching its highest level since mid-September, according to FactSet data. Some technical analysts expect crude to test the $100 level this summer.
Brent crude for August delivery also advanced, adding 31 cents, or 0.3%, to $106.26/bbl. Brent crude on Friday rose 98 cents.
U.S. oil futures on Friday jumped $1.16, or 1.2%, after the U.S. late Thursday said it would increase aid to the opposition in Syria's civil war, marking a policy shift.
"The oil price is currently being driven primarily by geopolitical aspects," analysts at Commerzbank said in a note on Monday. "The decision of the U.S. to supply arms to the rebels in Syria threatens finally to turn the civil war in Syria into a proxy war between the world powers, given that Russia is providing military support to the Assad regime," they added.
Although Syria is not a key oil producer, there are concerns that violence will extend to other parts of the region.
Russian President Vladimir Putin is expected to discuss Syria with President Obama during the Group of Eight meeting in Northern Ireland that's starting Monday and running through Tuesday. Russia on Friday criticized the U.S. decision to arm the rebels.
The G-8 meeting also could produce a statement on strategic oil reserves that could be tapped, according to other analysts.
Price jumps tied to Syria should be "more than offset by the prospect of releases from the vast strategic reserves held by the US and its allies," commodities analysts at Capital Economics said in a research note on Monday. "Indeed, G-8 leaders meeting this week might remind the markets of that option."
Michael Lynch, president of Strategic Energy & Economic Research, said Syria remains the main focus on Monday, but there aren't any specific reports that have traders' attention.
"It's just kind of background pressure, with people expecting worsening fighting," he told MarketWatch.
Meanwhile, voters in Iran, one of the world's largest oil producers, over the weekend elected Hassan Rohani as the country's next president. The landslide win for the moderate candidate handed a victory to Iranians who were calling for change, which could offer some relief in the crisis-embattled Middle East region, the analysts from Commerzbank said.
"At the very least, the election result makes it less likely that Israel will launch a military strike against Iran's nuclear facilities. This argues against any further increase in the risk premium which would otherwise have been justified by the escalation of the Syrian conflict," they said.
Strategic Energy's Lynch said he expected oil prices to react more to Rohani's victory. He said there now could be more discussions with Iran and even a loosening of sanctions, leading that country putting more oil on the market.
"I'm a little surprised that the Iranian election news didn't see downward pressure on prices," he said. "Just the possibility of another million barrels a day on the market should push prices down."
In U.S. economic news on Monday, the New York Fed released its latest report on manufacturing activity in the New York region. It said the Empire State index improved a little and beat expectations, but overall data continued to signal softness. A gauge of confidence among home builders hit a seven-year high.
In other action Monday, natural gas for July delivery (NGN13) rose 10 cents, or nearly 3%, to $3.83/MMBTU. July gasoline (RBN3) dipped 1 cent, or 0.4%, to $2.88/gal, while July heating oil (HON3) was roughly unchanged at $2.96/gal.
Dow Jones Newswires