Brent crude climbed to a three-day high as U.S. President Barack Obama sought support in Congress for armed intervention in Syria, fanning concern that possible military strikes may disrupt Middle Eastern oil exports.
Futures advanced as much as 1.2 percent after Israel tested its missile defense system by launching missiles in the Mediterranean Sea. Russia’s RIA Novosti news agency reported that the two missiles landed in the water. Republican Senators John McCain of Arizona and South Carolina’s Lindsey Graham warned fellow lawmakers not to let Syrian President Bashar al-Assad’s alleged use of chemical weapons go unanswered.
“I don’t expect anything to happen for the next couple of days in regards to military action,” said Michael Poulsen, an analyst at Global Risk Management in Middlefart, Denmark. “But given the rhetoric used, something will happen in the not-so-distant future.”
Brent for October settlement rose as much as $1.41 to $115.74 a barrel on the ICE Futures Europe exchange and was $115.09 as of 1:22 p.m. London time. The contract gained 32 cents to $114.33 yesterday. The European benchmark crude was at a premium of $7.76 to West Texas Intermediate futures.
WTI for October delivery fell 29 cents from the Aug. 30 settlement to $107.36 a barrel in electronic trading on the New York Mercantile Exchange. Floor trading was closed yesterday for the U.S. Labor Day holiday, and yesterday’s transactions will be booked today for settlement purposes.
The Israeli Defense Ministry said it will release more details of the missile test later. The demonstration was a possible signal to Iran, Syria’s main regional ally, and dramatized the potential regional spillover of a U.S.-led assault.
Prices initially jumped when RIA Novosti reported that Russia’s missile tracking system had detected the firing of two ballistic rockets in the central Mediterranean.
Oil trimmed a third month of gains last week after the U.K. House of Commons rejected a proposed strike against Syria, prompting President Barack Obama to seek approval from Congress before taking action. McCain and Graham, two of the Senate’s most vocal advocates of tougher military action than Obama, said after a White House meeting yesterday they were persuaded that the president is working toward an effective policy.
The Middle East accounted for about 35 percent of global oil output in the first quarter of this year, data from the International Energy Agency show. Syria, which pumps limited amounts of crude, borders Iraq, the biggest producer after Saudi Arabia in the Organization of Petroleum Exporting Countries.
Libya is exporting a “nominal quantity” of crude from the Brega and Mellitah terminals, Omar Shakmak, the deputy oil minister, said yesterday without specifying the amounts shipped amid strikes and disruptions. The OPEC nation produced 575,000 barrels a day last month, according to a Bloomberg survey of analysts and producers.
Hedge funds and other money managers increased bullish bets on Brent to the highest in more than two years, data showed yesterday.
Speculative bets that Brent will rise, in futures and options combined, outnumbered short positions by 231,962 lots in the week to Aug. 27, ICE Futures Europe said yesterday in a weekly report. That’s up 11 percent from last week and is the most since at least January 2011, the starting point for the data series.
Brent may extend gains after a bullish technical formation known as a “golden cross.” The 50-day moving average, at about $108.70 a barrel today, yesterday climbed above the 200-day indicator for the first time since mid-April, data compiled by Bloomberg show. Investors typically buy contracts when a moving average rises over a longer-term one.
“Volatility is only going to rise further as the price path seeks out the next headline,” Stephen Schork, the president of Schork Group Inc., a consultant in Villanova, Pennsylvania, said today in an e-mailed note. “Wall Street is buying, with the rise in open interest implying that new money is starting to come back into ICE Brent.”