(EnergyAsia, September 12 2014, Friday) — Brent crude prices hit a new 15-month low of US$96.72 a barrel hours after US President Barack Obama ordered the start of a new protracted war campaign in the Middle East with air strikes in Syria and Iraq to try stop the advance of the Islamic State (ISIS) military.
Elected to office in 2008 on an anti-war platform and the promise to pull US troops out of Iraq, Obama announced the new strategy that risks expanding and intensifying on-going conflicts in the Middle East. The US will begin bombing Syria for the first time, a decision that Russia says violates international law as military action against a member state requires UN Security Council approval.
The Obama strategy also calls for expanded military and equipment supplies to the Iraqi and Kurdish military as well as “moderate” elements of the Syrian rebel militia fighting the regime of President Bashar Assad. Analysts have warned that Syrian rebels comprise many groups including ISIS members while the loyalty of the Iraqi military itself is suspect as many had fled or even joined the radical Islamic group when it took over parts of the country in June.
Obama’s “coalition” includes Saudi Arabia, where the Sunni-derived ISIS has a strong following, but excludes Syria and Shia-based Iran which have the most motivation to fight the most radical Islamic terror group yet to emerge after Al Qaeda.
For now, oil supply disruptions have been kept manageable as all sides have a stake in ensuring production make their way to market.
The rise in North American oil production has largely ensured that the loss of supplies from Libya, Syria and Iraq along with lower Saudi output has not been missed. The US Energy Information Administration (EIA) expects US oil and liquids production to surge to 9.53 million b/d next year, the highest since 1970.
Brent, which last traded below US$97 a barrel in June 2013, could test that support as the global markets remain well supplied. WTI touched a low of US$90.43 on September 11, and is also at risk of breaking the US$90 support level.