Aftermath of Syria on crude oil prices - Nirmal Bang

Recently, suspected chemical weapons attack in Syria in outskirts of Damascus killed many people and thousands were injured. The government forces tried to drive out rebel forces with a heavy bombardment near the region surrounding Damascus. Major bombardments of toxic agents on rebel forces raised a lot of questions regarding the chemical weapons used for attack.

The rising tensions across the nation forced UN to call an emergency meeting to clarify what happened in the suspected chemical attack in Syria on the same day. Meanwhile, the US, UK and France are among some 35 member states that have requested UN inspectors that are already investigating three sites of alleged chemical weapons use in Syria to probe the latest incident as soon as possible.

The United Nations chemical weapons inspectors were in Syria since Sunday i.e. 18th August 2013 investigating three locations where chemical weapons were allegedly used, including the northern town of Khan al-Assal, where some 26 people were killed in March.

The recent suspected chemical attack was a year after US President Barack Obama warned the Syrian government that using chemical weapons would cross a "red line".

There is a lot of confusion going on as the Syrian Foreign minister has completely rejected the fact that Syrian government would use a chemical weapon for attack. It is expected that the video has been fabricated as why the government will use a chemical weapon knowing the fact that the UN team is already in Syria for inspecting earlier affected sites. Also, Damascus claimed that the chemical weapons stored by the army in Syria would never be used inside the country.

However, the UN could not visit the second site due to the weak safety measures and therefore postponed the investigation by one day. Till now UN inspectors didn’t find any strong evidence of the chemical weapons usage apart from the videos of aftermath of an attack.

On the other hand, the US military is ready to take an action against the use of chemical weapons by Syrian government. The US is also considering launching a military strike on Syria as they believe that the UN inspection programme would not provide any significant evidence as the evidence available has already been corrupted. The US also cancelled the conference meeting with Russia which was scheduled for tomorrow to resolve the ongoing crisis in Syria.

The sudden decision of US has prompted Russia and China to warn the US against its military intervention in Syria as such action would result into "catastrophic consequences" for the region.

As Russia already enjoy a good and strong military technical co-operation with Syria, we see no reason for Russia to support the West on military attack on Syria. Further, Russia has warned the US to remain cautious while handling the ongoing crisis in Syria and follow the international law. Any military attack on Syria without consulting the UN Security Council will lead to more turmoil in Middle East.

Further, we believe that ongoing supply concerns from Libya, recovery hopes in Europe and improvement in demand from China have remained main reason for Brent Crude oil to trade above $105/barrel. Now the focus has shifted to geopolitical tension and hence premium of $5-8/ barrel will be witnessed in oil prices and any attack on Syria by the US can lead to a major spike in Crude oil and in such scenario we may see Brent Crude oil testing $120/barrel levels.

Source : Equity Bulls

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