Nomura: Intervention in Syria will have little to no effect on global oil supply

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A senior analyst at Nomura has said that a US-led military strike on Syria will have little to no disruption effect on global oil supply.

Alastair Newton, senior political analyst at Nomura, said:

We cannot emphasize too strongly that, whatever option may be adopted we see little or no direct threat to global oil supply emanating from a US strike against the Syrian regime.

He drew a comparison with the movement of Brent crude oil prices in Egypt after the deposition of president Mohamed Morsi, which dropped to the lower end of the $105 to $120 per barrel range in the aftermath of the coup. This was due to “misplaced, we believe, concerns over the security of the Suez Canal”.

We therefore see sentiment, ie, perceived geopolitical risk, rather than reality (with all due respect to Henry Kissinger’s famous quote, ie, “Perception is reality”) as the primary driver of the 15% or so increase in the price of Brent over the past two months….

We therefore see recent price action around Brent in particular as an overreaction to the prospect and therefore expect the price to dip again after a strike (if not, perhaps, even before any military action relative to yesterday’s high).

Newton said on Monday that the most likely course of action is “a relatively short series of surgical air and missile strikes against key regime installations and ordnance”, given senior US military staff’s reluctance to get involved in any sort of sustained engagement in Syria.

This is likely to keep an upward pressure on oil prices, he said, but given the unlikelihood of any rush into action, financial markets will have plenty of time to get used to the notion of military action.

Newton's comments seem to run in contradiction to those made by analysts at Societe Generale yesterday, who said they were concerned an attack on Syria will "reverberate through the region, increasing the spillover into other countries and possibly resulting in a larger supply disruption elsewhere".

Iraq in particular was cited as a major worry. However, a potential loss of 500,000 to 2m barrels per day of production could be met by spare capacity in Saudi Arabia, the report said.

This means, the analysts said, that Brent crude could start trading as high as $125 per barrel in anticipation or event of a strike – and perhaps “spike briefly” to $150 per barrel if an attack disrupts supply from Iraq and other Middle Eastern producers.

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