Markets React to Syrian Conflict and Implications of US Intervention

Posted by Mark Pszeniczny on Aug 28, 2013 3:42:00 PM

As news continually breaks on developments on the Syrian conflict and the potential implications of US or other world power intervention in the region, stocks are dropping and commodities are going through the roof.

US Secretary of State John Kerry announced this week that there was “undeniable” evidence that the recent chemical weapons attacks in Syria were perpetrated by the Assad regime. The announcement in tandem with the presence of UN Weapons inspectors being fired upon in the country prompted speculation that the US may intervene with military action. Additionally, the
recent attacks cross the “red line” declaration issued by the Obama administration several months ago regarding chemical weapons.

The threat of US intervention has prompted Global Markets to react heavily to the news. In the US, the Dow fell Tuesday by over 170 to hit a two month low of 14,776.13 and the Nasdaq fell 78.13 points to 3579.44. Stocks took a hit while commodities shot up, notably gold in both the US & Canada. Brent Crude hit a six month high on Tuesday in the wake of the rumors of
military action, and US Crude rose over 3 dollars as well. Oil Prices have risen 15% over the past 3 months on concern over violent civil war in Egypt, and now conflict in Syria is pushing them even higher.

The issue with Syria is complex – Syria itself is not a major exporter. The issue is essentially concern that US intervention in Syria will spark regional unrest as well as create increased tensions with other major world powers, specifically Russia and China. Consensus seems to be that the major issue with intervention in the conflict could interrupt export and production schedules, particularly those in Iraq and Libya, according to cbc.ca.

It’s estimated that about 1% of global oil supply runs through the bay of Iskenderun in Turkey, only a few miles off the Syrian border, and tensions in Syria could threaten this export route, according to Olivier Jakob of Petromatrix in Reuters on Tuesday. Disruption of this supply
route would have a deep impact on European and Asian markets, particularly if tension spreads throughout the Middle East, which produces over 1/3 of Global Oil supply.

 

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Topics: European Economy, Eygpt, CRUDE, rising gas prices, Syria

NYMEX Futures End Positive for Fifth Straight Session

Posted by Mark Pszeniczny on Aug 15, 2013 4:23:00 PM

All news today was nothing but feed for the Bulls that have been in control of the pits over the last week.  After HO dipped below 2.95 late last week, buying has come back with force.  Today was strong out of the gate and while RBOB was tamed slightly, HO kept right on rolling.  NOAA models now show Tropical Storm Erin churning in the mid Atlantic with an expected path set on Puerto Rico for sometime late next week.  First storm of the season always brings the buyers out.  Data on the economic front showed the US had the lowest unemployment claims in just over six years.  While this is good for the economy, not so good for Future pricing.  Along side that, most now expect the FED to significantly slow down their Bond buying program over the next sixty days as the economy shows signs of improvement.  Finally, the continued and recently heightened unrest in Egypt, has many concerned over the regions safety.  Egypt largely controls the Suez canal which is a vital shipping lane for Crude barges, anything that can remotely affect Crude shipments will push futures higher.  Still optimism remains as RBOB shrugged off the news and was only able to muster a 15 point gain to close at $2.9845, while HO jumped another .0250 to $3.0728 ( the high end of the wide range  we have been in) .  Crude added .48 to $107.33.  I stay optimistic for lower prices coming as the semi mixed close is always a key point to momentum swings.

 Daily Heat Chart
Daily heat chart
RBOB Close
                      CLOSE     CHANGE            
SEP   2.9845         +.0015
OCT  2.8562        +.0068
NOV   2.8118        +.0101
DEC    2.7813      +.0116
JAN     2.7646     + .0117
                  FEB    2.7599     +.0119               
  
HEAT Close
      CLOSE            CHANGE
SEP  3.0728        +.0250
OCT  3.0795      +.0255
 NOV  3.0823      +.0250   
DEC  3.0808     +.0246
JAN   3.0791    +.0240
FEB  3.0692     +.0243

 

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Topics: Eygpt, Tropical Storm, CRUDE, FED rates

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