Oil Hovers Near $107, With Syria In Focus

Benchmark U.S. crude-oil futures hovered around the $107 level in electronic trade Monday amid the prospect of Western military intervention in Syria.

Crude oil for October delivery  advanced 48 cents, or 0.5%, to $106.90 a barrel, adding to Friday’s 1.3% rally on the New York Mercantile Exchange. The contract rose as high as $107.20 earlier in the day.

October Brent crude  saw a more muted 10-cent gain, a rise of 0.1%, to $111.14 a barrel after a 1% rise on Friday.

The advance came as the U.S. reportedly considered using military force in the Syrian civil war after the government there allegedly used chemical weapons against civilians.

The regime of Syrian President Bashar al-Assad said it would allow United Nations inspectors in an effort to prove its forces didn’t use chemical weapons, but the U.S. reportedly dismissed the offer as being “too late to be credible.”

While Syria isn’t a major oil producer, unrest in the key petroleum-producing Middle East region can prompt broad concerns about crude supply, which in turn bid up oil futures.

“Rising tensions over chemical attacks in Syria has placed upside pressure on … crude oil, with traders anticipating possible military intervention by the U.S. government,” wrote Rivkin global analyst Tim Radford on Monday.

While Radford said that “the likelihood of a U.S.-led military conflict remains unlikely, until at least more information is shed on the matter,” he added that “overall, geopolitical risk will likely continue supporting oil prices in the near term.”

Crude futures’ improvement came despite gains for the U.S. dollar, with the ICE dollar index  at 81.383, up from 81.366 late Friday in North America.

In other energy-futures trade Monday, September natural gas  rallied 4 cents, or 1.1%, to $3.52 per million British thermal units, rebounding from a 6-cent tumble on Friday to close off a volatile week for the contract.

September gasoline  gave up a penny, for a 0.2% drop to $3 a gallon, while September heating oil rose less than a cent for a 0.1% rise to $3.10 a gallon.

Source : Marketwatch