Quote of the Day
Obstacles are those frightful things you see when you take your eyes off your goal.
Oil prices (NYMEX:CLV13) are drifting lower as the immediacy of a U.S. strike on Syria has eased over the last several days. The U.S. President is currently on his own insofar as support from traditional European allies (at the moment), and is in the midst of lobbying key figures in the U.S. Congress ahead of their vote on military intervention next week sometime. Several key U.S. political figures in Congress have voiced support for a limited strike in Syria. However, this is very unpopular with the American public as most polls I have seen show the majority of Americans against any involvement in Syria. Although most times the U.S. Congress votes in favor for a specific Presidential request when it comes to military involvement, the U.S. public may be the swaying factor in next week’s vote.
In any event, even if the U.S. does strike Syria it is likely to be very limited and not involve any ground troops or escalation. As such the unintended consequences from such an attack are also likely to be limited. I do not expect any new oil supply interruptions coming from the region as a result of a limited attack on Syria. I would also expect the U.S. and/or the IEA to release oil from the SPR if there are any signs of supply issues as a result of an attack.
For now the market sentiment has eased slightly. Prices have declined off of last week’s highs. However, I do not expect a major collapse in oil prices anytime soon as the underlying issues in the oil patch is not so much Syria rather it is the plethora of supply issues coming from places like Libya. In fact Reuters is reporting that Libyan oil output has declined further to around 150,000 bpd and lower than last week’s estimate of 250,000 bpd as the strikes and protestors continue to disrupt supply. Until the international crude oil supply issues are resolved the price of oil is likely to remain relatively firm with or without an attack on Syria.