The simmering geopolitical tensions in the crude rich Middle East are having an impact on world oil prices as they hit 2 month highs on Monday.
Light sweet crude for delivery in August soared $2.79 to $92.66 per barrel in New York, the highest close since 17 May. In London, Brent North Sea oil for delivery in September jumped $2.64 to $107.80 per barrel the highest close since 22 May.
“Prices have climbed. The conflict in Syria which has already been under way for 16 months appears to be escalating. The Iran conflict is also coming into increasingly sharp focus, Israel having blamed Iran for the attack on Israeli tourists in Bulgaria,” Carsten Fritsch, analyst of Commerzbank, said.
Thousands of Syrians are fleeing the country as fighting is raging in the capital Damascus and second city of Aleppo. Syrian rebels are mounting attacks on cities, villages and border crossings with neighbouring countries.
Russia and China vetoed a Western backed UN Security Council resolution last weekend that paved the way for sanctions and moved a step closer toward military intervention. World powers are in deep disagreement on how to end the fighting in the Middle Eastern country.
Susan Rice, US Ambassador to the United Nations, expressed her dismay at the failure of a UN Security Council meeting on Syria.
“We will intensify our work with a diverse range of partners outside the Security Council to bring pressure to bear on the Assad regime and to deliver assistance to those in need,” she said in a news conference.
Tamas Varga, an analyst at PVM Oil Associates, said Syrian oil production capacity is only around 400,000 barrels per day and prices are bound to go up as clashes intensify across the country.
To make matters worse, Israel accused Iran and Lebanese group Hezbollah of carrying out a deadly attack against its citizens in Bulgaria, a move seen by many as beating war drums in the Middle East.
“All the signs point to Iran linking Wednesday’s blast to a string of attempts to attack Israelis around the world. Israel will respond forcefully to Iranian terror. Iran responded by saying it strongly condemns all terrorist acts,” Israeli Prime Minister Benjamin Netanyahu said.
Market sentiment was also boosted after figures showed American crude stocks sank 800,000 barrels in the week ending 13 July 2012 for a fourth weekly decline in a row. Prices had risen at the start of the week on tensions over major crude producer Iran which said that US military deployment in the Gulf was a source of insecurity.