Oil Vultures

While globally debate is going on regarding United Sates getting ready to attack Syria and the entire world is concerned about the potential fallout of this attack, oil vultures are concerned about movement of crude price, in case the US undertakes this assault.

 

US President Barak Obama faced stiff resistance at the G-20 summit against attacking Syria without UN Security Council endorsement that, which is confusing these vultures. They still believe that the US strike on Syria would spread unrest and further disrupt Middle East crude supplies that would lead to hike in oil prices. Though, Syria is not a major oil producer, yet any regional contagion has kept the markets on a tight leash.

Many analysts are sitting with crossed fingers and exploring what will happen if a military action against Damascus ultimately gets underway — despite the odds. Pundits seem divided; some are deeply concerned about the long term impact on oil markets and the instability that it might cause in the region. They are of the view that prices per barrel could easily go up to US$130 or even beyond. 

Others are stressing that any military action in Syria is more likely to cause prices to fall because markets have already risen in anticipation of a US intervention and there is little actual oil at risk in Syria. They believe that if Syrian civil war spread over two years hasn’t sparked an energy crisis, US intervention isn’t going to make a difference. But markets may get some jolts on the possible unwinding of the massive stimulus program by Federal Reserve. 

“The higher the run-up prior to the event (strike on Damascus), the greater the post-event decline,” underlined Morgan Stanley in a note last week. In a study of major conflicts in the Middle East since the 1973 oil crisis, Morgan Stanley found that in most Middle Eastern conflicts — including when Israel bombed an Iraqi nuclear reactor in 1981 and the US-led invasion of Iraq in 2003 — oil prices were lower six months after the initial surge.

Another reason some investors expect a drop in oil prices is the fact that markets tend to factor in geopolitical concerns before any event. The rise means there is potentially a greater risk of a price correction if money managers run for the exit at the same time.

This report should be an eye opener for Muslim oil producing countries that are demanding the United States to attack Syria at the earliest and are also assuring of the fullest monetary support. They have a myopic view that assault will hike oil price. They are ignoring reports emanating from Washington that Tehran has ordered militants in Iraq to attack the US Embassy and other American interests in Baghdad in the event of a military strike on Syria

The point to be kept in mind is that Israel is taking full advantage of the volatile situation. While Syria remains gripped in turmoil, Israel has given exclusive exploration rights to a 153-square mile radius in the southern part of the occupied Golan Heights to a subsidiary — of the New York-listed company Genie Energy — advised by former vice president Dick Cheney and whose shareholders include Jacob Rothschild and Rupert Murdoch.