The prospect of an armed confrontation with Syria sent crude prices soaring on Tuesday, with U.S. oil ending just shy of a new 2013 high as traders positioned for a new Middle East conflict. Fears of regional instability that could crimp oil supplies sent both Brent and West Texas Intermediate surging to multimonth highs during the session, as speculation churned about an intervention in Syria. Traders spurred October U.S. crude, or WTI, to a new 2013 high at $109.32, before it cooled gains to settle at $109.01. That was its highest since February 24, 2012. Brent crude set a new six-month high at $114.42, rallying by $3.50 on the day to its highest since Feb. 26.
Syria ranks among the smallest oil producing nations in the Middle East, with International Energy Agency data listing the country as 32nd among global oil producers. However, with instability already roiling the region and raising widespread fears about supply, analysts say a new conflict could further poison the dynamic in the region and trigger new tensions.
“When we see WTI prices escalate like this, it typically signals more worry about supply disruptions coming out of the Arabian Sea and other channels” such as the Strait of Hormuz and the Suez Canal,” Richard Hastings, macro strategist at Global Hunter Securities told CNBC.
The crisis follows the recent turmoil in Egypt. “This is a huge deal, particularly for the oil markets,” Helima Croft, commodities research head at Barclays, said on CNBC’s “Squawk on the Street.” “Syria is not a big oil producer, but do we have violence spilling over to key producers like Iraq, OPEC’s second-largest producer? They’ve seen a run-up in violence, and some have tied that significantly to what is going on in Syria,” Croft added.