LONDON, Sept 5 (Reuters) – Global oil prices held above $115 a barrel on Thursday after U.S. President Barack Obama won some support from lawmakers for a military strike on Syria, adding to concerns that Middle East supply disruptions will persist.
Brent crude oil prices are unlikely to rise steeply, given expectations for a short, limited strike on Syria, unless the situation goes out of control and key oil producers in the Middle East get dragged into the conflict.
Gains may also be limited as investors await details of possible moves by the U.S. Federal Reserve to roll back stimulus, which would strengthen the dollar and weigh on commodities.
“My central view is that Middle East premiums will remain in the market for a while,” said Ric Spooner, chief market analyst at CMC Markets.
“If you take it that the United States will attack, the key question remains what happens after that? Will it stay limited, or will Syria’s neighbours get dragged in?”
Investors expect any strike to be limited. The Senate Foreign Relations Committee voted in favour of a resolution that sets a 60-day limit on any engagement in Syria, with a possible 30-day extension, and bars the use of U.S. troops for ground combat. (Full Story)
While Syria is not a big oil producer, investors have been worried that a strike there by Western forces may disrupt supplies from a region that pumps a third of the world’s crude.
Markets are already struggling to cope with a loss of supplies from Libya. Outages in the Middle East and Africa have surpassed 3 million barrels per day, or about 3.5 percent of global demand.
“Syria is making a lot of headlines but the market is really about Libya,” said Olivier Jakob, analyst at Petromatrix.
“It is very difficult to forecast and it could as easily go back to normal tomorrow or not. But the reality is that the amount of oil coming out of Libya is very small.”
Libya’s oil exports have shrunk to just over 10 percent of capacity from three out of a possible nine ports, as armed groups tightened their grip on oil facilities.(Full Story)
Libya’s prime minister said patience was running out with protesters, but previous warnings that the government would take action have so far failed to restore exports. (Full Story)
Oil, particularly the U.S. benchmark, also gained from an industry report showing a steep fall in crude stockpiles in the world’s biggest consumer.
Crude inventories fell by 4.2 million barrels in the week to Aug. 30 to 362 million, the American Petroleum Institute (API) said, versus expectations for a decrease of 1.3 million. API/S
The U.S. benchmark was also supported by expectations of a revival in demand growth after U.S. automobile sales gained at their fastest pace since October 2007. (Full Story)
Global markets await concrete details of any Federal Reserve plan to roll back stimulus. One top Fed official said he was open-minded about reducing stimulus this month, as investors largely expect the central bank to do, while another policymaker said the bank should do more for the economy. (Full Story)
“We may see a few dollars coming off on oil from here, if there is any announcement on the stimulus,” Spooner said. “It will weigh on oil as the dollar will strengthen.”
Brent may drop to $113.69 a barrel as indicated by its wave pattern and a Fibonacci retracement analysis, while the U.S. benchmark is expected to slide to $105.76, Reuters technical analyst Wang Tao says. TECH/C