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This Week in Energy: Syria and Oil Prices – What is Obama’s next Move?

This week, it’s all about Syria because what happens next here will determine the course of geopolitical dynamics across the Middle East—and of course will continue to affect world oil prices and the future of exploration and production.

Before we get started – those of you investors and traders wondering how to play the Syrian situation need to read Dan Dicker’s latest report, where he gives Premium subscribers the absolute skinny on what’s happening in Syria and how – EXACTLY – to trade it. You can read Dan’s report for free by starting a 30 day Free trial to Oilprice Premium – click here for info.

What we are waiting on is word from Washington, which is under pressure to launch “Operation Tomahawk” on specific Assad targets in Syria, but is finding itself alone, having lost the British and without the UN’s evidence that the recent chemical attack that crossed the “red line” was actually perpetrated by Assad.

Yesterday, the UK government rejected Prime Minister David Cameron’s push to join the US in military action against Syria. The motion was defeated by a narrow vote of 285 to 272. The Labour Party’s Ed Miliband said US-UK ties could not be just about doing what Washington tells it to do. The Brits are a bit hesitant these days about getting involved in another Iraq based on dubious intelligence.

In this case, the dubious intelligence is in the form of (lacking) evidence that the Assad regime perpetrated the 21 August chemical attack near Damascus. The UN is there now attempting to gather evidence, but so far it hasn’t come up with anything.

The UK government will support military action in Syria if the UN comes back with evidence that Assad ordered the attack. The UN team is supposed to wrap up its work today and hand it over to the UN Secretary General this weekend—so until then, we wait.

But the Obama administration is under pressure to launch an attack now—before he heads to Russia next week to meet with President Vladimir Putin.

Will he do it? That’s anyone’s guess right now, but the administration has indicated it will attack on its own, without a coalition of the willing—meaning without the UK and without the UN’s blessing.

What would Operation Tomahawk entail, exactly: Not a full-fledged military intervention with boots on the ground and all that—just a few days of air strikes on key Assad installations. The aim of this would be to restore the “red line”—which itself rests on the assumption, without evidence, that Assad ordered the chemical attack. It will not end the conflict. It will only send a brief message that the US is prepared to take this further. Without the evidence, though, and with plenty of reason to think that the chemical attack was not the work of Assad, who was already winning, this could turn into another Iraq story. (Even a Syrian rebel has intimated that Assad wasn’t behind the attack).

And of course, Russian intelligence points to other perpetrators, as expected. If Washington goes ahead with the attack, as Russia readies its warships in the area, it will be interesting to see how Obama’s meeting with Putin goes down next week.

In the meantime, crude oil prices are up on fears of widespread Middle East unrest should the US launch air strikes on Syria. In early trading on Wednesday, crude prices climbed to a two-year high of over $112 per barrel, settling just under $108 on Thursday. In London, Brent crude prices were up 1.5% on Wednesday at $116, closing Thursday at $114.34. If there is a US strike, we can expect this to spike again as the situation snowballs into a geopolitical disaster for the Middle East. The volatility of a pending strike on Syria is already palpable on the streets of Cairo, Egypt, and in Iraq, every move on Syria further entrenches the upswing in sectarian violence.

Don’t miss our additional thoughts on what’s really going on in Syria and Egypt in this week’s Premium Newsletter. We also bring you this week’s hot pick from trader extraordinaire Dan Dicker, and a lengthy look into the world’s emerging oil shale (kerogen) plays. Click here to find out how you can receive 30 days worth of free energy intelligence and investing advice.

That’s it from us this week.

I hope you enjoy the below report on Jordan and have a great weekend.

Best regards,

James Stafford
Editor, Oilprice.com




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