BackCommodities gain to six-month high as oil rallies on Syrian risk
Societe Generale says US-led strike on Syria likely within next week, raising possibility of Brent reaching a record $150
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London/New York: Commodities rallied to a six-month high, led by a surge in energy prices, on expectations that the US and its allies are on the threshold of launching a military strike against Syria.
The Standard and Poor’s GSCI Spot Index rose as much as 1.9% to 675.44, the highest since 20 February, and settled at 668.6 at 4pm in New York. West Texas Intermediate (WTI) crude oil futures for October delivery climbed as much as 3% to $112.24 a barrel, the highest since May 2011, while Brent crude gained as much as 2.6% to $117.34 on concern that supplies may be disrupted.
A US-led strike on Syria is likely within the next week, raising the possibility Brent may reach a record $150 if the conflict affects oil output in Iraq or other nearby producers, according to Societe Generale SA. The US, France and the UK are laying the legal groundwork to justify action and moving forces into place. Syria is suspected of launching a chemical weapons attack on its citizens on 21 August outside Damascus.
“People are concerned about the geopolitical implications of America launching, however limited, another conflict in the Middle East," John Stephenson, who helps oversee about C$2.75 billion ($2.6 billion) at First Asset Investment Management Inc. in Toronto, said in a telephone interview. “People believe oil will be eventually disrupted if hostilities become worse."
Stocks decline
Brent and WTI contracts plus gold account for about 50% of the GSCI gauge, which is headed for a second monthly advance, the longest rally since a year earlier. This month’s 4.7% rally in commodities contrasts with the 2.1% drop in the MSCI All-Country World Index of stocks.
“Brent may gain briefly to $150 if the conflict in Syria spreads to other parts of the Middle East, causing supply cuts," Societe Generale said in the report. Brent traded at $147.50 in July 2008, the highest intraday price on record.
“The market is really focused on the safe-haven aspect," said David Lennox, a resource analyst at Fat Prophets in Sydney. “There was a bit of risk off the table, with equity markets heading south on the back of escalating words about actions on Syria."
US defence secretary Chuck Hagel told the BBC in an interview broadcast on Tuesday that the US has assets in place and forces are ready to go. Tomahawk cruise missiles may be launched at night against Syrian targets, said Jeffrey White, a defence fellow at the Washington Institute for Near East Policy and former Defense Intelligence Agency analyst. Bloomberg
Phoebe Sedgman in Wellington contributed to this story.
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