Brent crude may “spike briefly” to $150 a barrel if a U.S.-led attack on Syria sparks further conflict in the Middle East and leads to supply disruptions, Societe Generale SA said in a report e-mailed today.
Military action against the regime of Syrian President Bashar al-Assad is likely within the next week, Michael Wittner, the bank’s New York-based head of oil market research, said in the report. Brent, the price benchmark for more than half the world’s crude, may rise to as much as $125 a barrel “in the coming days” in anticipation or event of a strike, the bank said. A spike to $150 is possible if a widening conflict halts output in Iraq or other Mideast producers.
“The concern is that an attack on Syria will reverberate through the region, increasing the spillover into other countries and possibly resulting in a larger supply disruption elsewhere,” Wittner said in the Aug. 27 report. “Our big worry is Iraq.”
Brent for October settlement surged as much as $2.87, or 2.5 percent, to $117.23 a barrel on the London-based ICE Futures Europe exchange after settling yesterday at the highest since Feb. 25. West Texas Intermediate crude rose $2.58 to $111.59 a barrel on the New York Mercantile Exchange, the highest intraday price since May 2011.
A potential loss of 500,000 barrels to 2 million barrels a day of production in the region could be met by spare capacity in Saudi Arabia, according to the bank.
“The Saudis could handle most likely scenarios, but the markets will look at the shrinking spare capacity that remains after any disruption is made up, and that would be bullish,” Wittner said in the report.
U.S. President Barack Obama’s administration is working with allies including the U.K. and France to agree on limited action against Syria after concluding that Assad’s regime used chemical weapons against civilians.