At the moment our focus remains on Syria for the next move in oil. As mentioned, Syria does not produce any oil of note however investors see any military invention by the US as a regional issue and as such a premium is being built into the market. Our view remains the same: if a military strike is made it will be fast, furious and limited, however it should also in our minds be decisive. This is crime against humanity and the perpetrators should be dealt with. At the moment Obama is saying that a military strike is not to be seen as a strike to remove the Assad regime rather the civil war needs to be fought out, but a strike to end the use of chemicals in warfare. We are not sure we understand this point, however if the US goes alone we feel Obama is seeking an "out " and just taking the moral higher ground and global leadership responsibilities should the UN fail to. The US is seen as sending a message to others not to use chemical warfare. In the event that indecision occurs we feel that oil will painfully trade higher and the spread between WTI and Brent will continue to widen. In the event of a sudden attack we will see oil spike higher then once it is complete it will probably collapse. The commodity could continue to climb given no resolution, with the areas of resistance being US112.70 basis the WTI and US120 basis Brent.
Although we continue to note high inventory levels for oil, and hence it should be a lot lower over time, the immediate risk is to the topside together with ancillary risk of what the cost of higher inputs will have on any economic recovery.