The days of high production versus low demand will be in recess this quarter as tensions grow. Escalating conflict between the various sides of the Syrian Civil War threatens increasing military action in the besieged country. But with a greater focus placed on the region by the United Nations and not the European Union and the US. Is Oil about to enter what CNBC refers to as a ‘Super Spike’ in its value and demand?
Geopolitics have, for a long time, weighed heavily on the price of crude oil across the globe. During the tense highs of the Six-Day and Yom Kippur wars of 1967 and 1973, Oil entered a powerful cross. With feverish demand and low supplies, it caused global shortages and a runaway rate of cost.
Will Syria bring about an Oil ‘Super Spike’?
Over the span of this week, Crude has increased from $62.10 per barrel to hit $67.28 yesterday. The direct intervention by US, French and British forces in Syria, in light of the recent alleged chemical attack, has heightened tension. Resulting in a climbing rate of value while forces face off over a civil war with a now widened scope of the conflict.
A continued rattling of sabres between both Russia and the US is also taking its toll on the rise of prices. Strategists from JP Morgan have suggested that crude increases could continue on for a maximum of 6 months. But investors may be hesitant to a conflict-driven spike in prices, which could lead to a bearish market later on.
“Equity and credit markets probably won’t welcome a geopolitical/supply-driven rise to $80 that could persist for several months.”