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Brent Crude May Spike to $150 on Syria Spillover, SocGen Says

By Ramsey Al-Rikabi - Aug 27, 2013

 

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 (GLE) 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 Londonbased
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.


To contact the reporter on this story: Ramsey Al-Rikabi in Singapore at ralrikabi@bloomberg.net To
contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

 

FUTURES AND OPTIONS TRADING INVOLVE SIGNIFICANT RISK OF LOSS AND MAY NOT BE SUITABLE FOR
EVERYONE. OPTIONS, CASH AND FUTURES MARKETS ARE SEPARATE AND DISTINCT AND DO NOT NECESSARILY RESPOND IN THE SAME WAY TO SIMILAR MARKETS STIMULUS. A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES & OPTIONS CONTRACT BEING OFFERED.  SEASONAL DEMAND AND CURRENT NEWS IN COMMODITES ARE ALREADY REFLECTED IN THE PRICE OF THE UNDERLYING FUTRUES.