Brent Oil Hits Six-Month High Latest News By Money CapitalHeight

Oil saw its biggest one-day rally in six months as the prospect of western military intervention in Syria unsettled investors.

ICE October Brent climbed 3.3 per cent to a six-month high of $114.35 a barrel, as analysts said air strikes could have consequences for the oil industry in neighbouring Iraq and complicate a solution to the stand-off over Iran’s nuclear ambitions.

 “The . . . risk for the oil market is the potential for the Syrian conflict to spread to neighbouring producing countries and imperil regional output,” Barclays analyst Helima Croft wrote.

Western powers appear to be readying a response to the suspected use of chemical weapons by the Syrian government in the country’s civil war. While Syria is a relatively small oil producer and most of its 400,000 barrels a day of pre-civil war output have already been shut in, the conflict is seen as having significant implications for larger regional producers.

Saudi Arabia and Iran, two of the world’s largest oil producers, have backed opposing sides in the conflict, which has set Sunni rebels against a Shia government. Iraq, the second-largest producer in the Opec oil cartel, has seen a sharp rise in sectarian violence, as refugees have flowed into the country from Syria.

The oil market is traditionally seen as a way for large investors such as pension funds to hedge against the risk of conflict in the Middle East, because oil prices rise on fears of a shortage, even as other assets such as equities fall.

But traders and brokers said they had not seen an influx of non-oil investors to the market, with most of Tuesday’s trading driven by oil producers and consumers, and hedge funds that actively trade commodities.

“We’re not seeing tourists today, though I wouldn’t rule that out if the market continues to rise for a few days,” said a trader at one bank.

While volumes increased, they were not significantly above average, surprising some market participants.

“Volatility has not reacted as much as we would expect in a crisis situation,” said Nabil Naccoul, head of oil trading at Citi in London.

Oil prices have been climbing steadily since the start of July as clashes between Islamists and the military in Egypt have raised concerns about the flow of oil through the Suez Canal and Sumed pipeline, key transit points for the global oil trade.

Strikes and militia activity in Libya and oil theft in Nigeria, as well as unplanned stoppages elsewhere, have also reduced supplies, contributing to higher prices.

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