Skip to footer

Strike on Syria would cause oil prices to ... drop?

The prevailing opinion is that any American intervention in Syria will send the price of crude oil skyward, Johnston writes. But, some claim that the opposite will happen. 

|
Hasan Jamali/AP
Oil pumps work Wednesday in the desert oil fields of Sakhir, Bahrain. Oil prices have historically rallied in anticipation of major global security events.
  • By Rory Johnston Guest blogger

Over the last month, oil prices have been steadily climbing due to an assortment of factors. The oil crisis in Libya, production problems in Nigeria, and low OPEC spare capacity have all served to tighten the oil market. Exacerbating this is the looming threat of Syria, where the prevailing opinion is that any American intervention will send the price of crude oil skyward. Estimates as to how high said price spike will be and how long it will last vary considerably, but most agree that military action will be generally inflationary. 
    
However, some claim that the opposite will happen. Carley Garner, co-founder of DeCarley Trading and author of A Trader’s First Book on Commodities, claims that the oil market might tumble following an American strike in Syria. A Morgan Stanley note this week echoed the sentiment, stating that “the higher the run-up prior to the event, the greater the post-event decline … we would be sellers on any upward price action on military intervention in Syria.”

Oil prices have historically rallied in anticipation of major global security events; fear of worst-case scenarios pushes speculators to bid up the price of oil, but that price falls after decisive action is taken. For example, in the lead-up to the 2003 Iraq war, the price of oil rose steadily before the beginning of the campaign. In the month that followed, the price of WTI dropped over 30%, from $37 a barrel in mid-March to $25 a barrel by the end of April. (Related article: Syria and Solar Panels)

Similarly, in the lead-up to the 2011 intervention in Libya, oil prices rose until the NATO mission moved from no-fly zone enforcement to targeted strikes on Gaddafi’s command and control compounds in Tripoli. During that episode, WTI climbed to over $110 a barrel in April and dropped to under $80 a barrel in August. 

Add to this that the stochastic oscillator—a tool that indicates whether a certain product is overbought or oversold—shows that crude oil has been firmly in the overbought territory since July and it is clear that the market is ready to sell. (Related article: How Events in Syria Affect the Global Oil Markets)

Those shorting the oil market could see handsome profits if historical trends hold, but are gambling that the second-order geopolitical effects will remain mild. The ethnic component of the Syrian civil war could push rebels to attack pipelines in western Iraq or even provoke a response from Iran, both of which would push the price of oil even higher.

It is certain to be an interesting month for oil traders, but only time will tell whether buyers or sellers are going to come away the winners.

Original article: http://oilprice.com/Energy/Oil-Prices/Why-Military-Action-Against-Syria-could-Cause-Oil-Prices-to-Fall.html

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.
editor@csmonitor.com
Subscribe
Mark Sappenfield
Editor

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

Subscribe to insightful journalism

QR Code to Strike on Syria would cause oil prices to ... drop?
Read this article in
https://www.csmonitor.com/Environment/Energy-Voices/2013/0911/Strike-on-Syria-would-cause-oil-prices-to-drop
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe