Oil Prices Could Fall Following A Limited U.S. Led Strike In Syria

While the geopolitical risk has been falling in Europe as European governments and central banks stepped up to ease Eurozone tensions, the latest events in Syria have raised the temperature and the ugly geopolitical risk has raised its head again. The growing possibility of some form of a limited U.S. led strike in Syria has increased fears about the stability of the world's key oil producing region. Until the nature of the possible military intervention becomes apparent, these concerns are likely to put upward pressure on oil prices.

Oil markets have reacted strongly to the deteriorating situation in the Middle-East and prices have spiked sharply due to the unpredictable consequences of a likely military action against Syria. Brent crude spot is currently trading at a six-month high of $115 and prices are expected to remain volatile leading up a military strike on Syria. However, prices could fall sharply after a strike, as the actual supply losses remain small and the chances of a violent response from Syria, Russian, or Iran also remain low. Nevertheless, unpredictable factors weigh heavily in the market for good reasons.

Brent hits 1-month top above $112 after US fiscal deal

Brent crude rose above $112 per barrel to hit a one-month high as the U.S. Congress approved a deal to avert a fiscal crisis, while promising data from top energy consumer China also supported prices.

The United States averted economic calamity when lawmakers approved a deal preventing huge tax hikes and spending cuts that would have pushed the world's largest economy off the "fiscal cliff" into recession. It also boosted investors' appetite for riskier assets and depressed the U.S. dollar against major currencies. A weaker greenback makes dollar-denominated oil more affordable for holders of other currencies.

Brent crude for February delivery rose 92 cents to $112.03 a barrel after touching $112.11, the loftiest intraday price since early December. Brent ended 2012 averaging over $111 a barrel, the highest annual average on record, after geopolitical threats to production offset worries about flagging oil demand.

U.S. crude was up 98 cents to $92.80 a barrel, after rising earlier to $92.85, the highest since October.

Oil rises above $108 on hopes for US budget deal

Brent crude oil rose above $108 a barrel on signs of progress in talks to resolve a U.S. budget crisis, easing fears the world's top oil consumer could tip into recession.

President Barack Obama made an offer to Republicans that included a major shift in position on tax hikes for the wealthy, leaving lower tax rates in place for everyone earning less than $400,000. Oil and other riskier assets rose after the U.S. president moved away from the $250,000 threshold that Democrats have been demanding for months.

Brent crude rose 60 cents to $108.24 a barrel. U.S. crude oil gained 31 cents to $87.51 a barrel. Brent crude has traded between $104 and $112 since November, pressured by concerns the United States will not reach a deal on the so-called "fiscal cliff" before the end of the year, triggering automatic tax hikes and spending cuts.
The oil minister of Saudi Arabia said the market was well balanced, with prices above $100 a barrel, a level the world's largest exporter has tried to achieve by adjusting production levels over the past two years. Average Brent crude prices have been relatively stable over the past two years, though they have at times spiked towards $120 and above as supplies from the Middle East have been disrupted by the Arab Spring and as Western sanctions have cut Iranian oil exports.

Oil prices rise past US$86 per barrel after China releases data showing economic upswing

The price of oil rose after Chinese data showed higher growth in electricity consumption and industrial production.

Benchmark crude for January delivery was up 23 cents to US$86.16 at midday Bangkok time in electronic trading on the New York Mercantile Exchange. The contract fell 33 cents to finish at $85.93 per barrel on Friday.

Signs that China's economy is recovering from a slowdown suggest there will be an increase in demand for energy to fuel its manufacturing industries.

The Chinese government reported that factory output increased 10.1 per cent from a year earlier, compared to the previous month's rise of 9.6 per cent year-on-year. Retail sales rose 14.9 per cent, up from October's 14.5 per cent. Electricity consumption rose 7.9 per cent in November from 6.4 per cent in October, according to Natalie Rampono, a commodities analyst with ANZ Banking Group in Melbourne.

Brent crude, which is used to price international varieties of oil, rose 21 cents to $107.23 per barrel, on the ICE Futures exchange in London.