OIL UPDATE

Geopolitical tensions in the MENA region have again dominated the headlines since the Arab Spring two years ago. The US’ condemnation of the Syrian government’s use of chemical weapons against its civilians suggested that some sorts of military actions would be taken by the West. Market concerns have moved further from the possibility of military strikes by the US and its allies to the aftermath of these attacks, i.e., reaction of Syrian President al-Assad’s response and his allies, and possibility of regime change in Syria.

Stocks plunged with the DJIA and the S&P 500 indices losing -1.14% and -1.59% respectively. Asian shares plummeted to lowest levels in almost two months. Commodities surged as the tensions intensified. WTI crude oil price jumped to as high as 111.59, a level not seen since 2011, earlier today while the Brent crude contract surged to a 6-month high of 117.23. Gold displayed its safe-haven appeal, remaining firm after rising to a 3-month high of 1424 yesterday.

Dataflow from the US was relatively strong. S&P/Case-Shiller house price index rose +0.9% m/m in June up from a +1.0% gain in the prior month. From a year ago, the +12% increase was similar to May’s +12.2%. Richmond Fed manufacturing index gained +25 points to 14 in August. On retail sales, the ICSC-GS chain store sales showed a +0.2% gain in the week ended August 24, after gaining +1.9% y/w in the prior week.

On oil inventory, the industry-sponsored API estimated that crude inventory rose +2.47 mmb in the week ended August 23. For fuels, gasoline stock slipped -1.13 mmb while distillate stock stayed unchanged. The official DOE/EIA probably shows that crude inventory slipped -0.25 mmb. Gasoline stockpile would have dropped -1.5 mmb while distillate added +1 mmb.

if the break out holds we could see higher Pices