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article imageBrent oil prices reach new highs on threat of Syria attack

By Ken Hanly     Sep 1, 2013 in Business
As geopolitical tensions rise usually the price of oil follows. With continuing tensions in Egypt, Libya, Iran, and now a strike planned on Syria oil has been reaching record highs.
On Wednesday, August 28, Brent crude reached a six-month high of $116.51 a barrel as plans are emerging for a strike on Syria in response to alleged gas attacks by the Assad regime. Within two sessions the price jumped more than 5 per cent. By Friday, the prices had slipped back below $115 a barrel as Britain voted not to join any action.
Oil prices are still on track to register the largest monthly gain in a year. Brent is up more than 6 per cent for the month of August. The problem is not so much Syria itself but decreasing production in Libya and disruption of production in Nigeria as well. The entire OPEC output declined in August as Libyan output declined more than offsetting increased production in Saudi Arabia. In August, OPEC countries exported around 30.32 million barrels per day which is down from a revised figure of 30.50 million barrels in July. The sources for the figures are oil companies, OPEC, and consultants.
The steepest drop in output is in Libya. Protests have shut down oil fields and export terminals, especially in the restive east of the country, leading to a monthly average of 500,000 bpd, compared to an output of 1.4 million monthly earlier this year. By late August production was even worse at a 250,000 per day rate or even lower. Harry Tchilinguirian, who is head of commodity market strategy at BNP Paribas in London said: "While Saudi Arabia may be stepping up production, the outage of Libyan crude oil alongside multiple declarations of force majeure on exports by fellow OPEC member Nigeria will remain supportive of Brent prices,"
According to the International Energy Agency the Middle East produces about 35 per cent of global oil output. Military intervention does not always lead to a rise in oil prices. In May 2011 when NATO swung into action against Gaddafi oil prices fell almost ten per cent. When the US-led coalition invaded Iraq, oil futures fell 15 per cent. Often it is just uncertainty that leads to price rises as investors fear that shortages may occur even though the present reality is that there is no shortage at all at least in the US. Oil stockpiles in the US increased by the most in four months with 362 million barrels sitting in tanks as a back-up should supplies be interrupted.
More about Oil production, mideast unrest, global oil prices
 
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