By William L. Watts and Sara Sjolin, MarketWatch
NEW YORK (MarketWatch) — Oil futures jumped Tuesday, more than canceling out losses from the previous day, as traders kept one eye on the potential for intervention by the U.S. and its allies in Syria and another on upcoming supply data.
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Crude oil for October delivery CLV3 +2.46% jumped $2.05, or 1.9%, to $107.97 a barrel, erasing all of its 50-cent drop in Monday’s regular New York Mercantile Exchange session.
Likewise, October Brent crude UK:LCOV3 +2.18% rose $1.66, or 1.5%, to $112.39 a barrel after falling 31 cents on Monday.
“One thing that’s benefitting from the uncertainty in Syria, along with the ongoing turmoil in Egypt, is the price of oil,” said Craig Erlam, market analyst at Alpari in London.
Brent crude is likely to test resistance at the $113.61 level and may surpass it with “relative ease” in coming weeks thanks to mounting tensions in Syria and the continuing unrest in Egypt, he said.
“The next key level above here will be $115, although I wouldn’t be surprised to see it close in on the 2013 highs just below $120.”
The recovery came after U.S. Secretary of State John Kerry said Monday that Washington was certain the Syrian government had used chemical weapons against civilians and that “there must be accountability” for its actions. Read how Syria "warning shot" could keep upward pressure on oil prices.
Reports early Tuesday said the U.S. was consulting with allies as it decided what sort of action to take against the Syrian regime. Meanwhile, Syria’s government denied the use of chemical weapons,.
While Syria itself is a minor oil producer, one of the main worries is that an escalation of the conflict could hamper supply more broadly across the Middle East. Chris Weston, chief market strategist at IG Markets, noted in a post Tuesday on Twitter that the nation’s oil output had fallen to 39,000 barrels a day in the first half of 2013, down from 350,000 barrels a day in March 2011.
Citi Futures analysts led by Tim Evans wrote late Monday said, however, that while Kerry’s remarks raised the likelihood of a punitive U.S. strike against the Syrian regime, wider supply problems remained less probable.
“Although the Syrian situation carries some potential to broader the conflict beyond Syria’s borders to put regional crude-oil supplies at risk, we’d put the odds of that somewhere still well below 50%,” they wrote.
Meanwhile, energy investors were set to receive the first of two weekly U.S. supply reports later in the day, with the American Petroleum Institute’s stockpile data for the week ended Aug. 23 due at 4:30 p.m. U.S. Eastern time.
Analysts polled by Platts expect a drop of 250,000 barrels.
Following Tuesday’s API report, the Energy Information Administration was scheduled to release its own weekly supply data Wednesday at 10:30 a.m. Eastern time. The EIA data are generally seen as more definitive.
In other energy-futures trading Tuesday, September gasoline RBU3 +2.11% ticked 4 cents higher for a 1.4% gain to $2.99 a gallon, paring a loss of almost 6 cents, or 1.9%, during Monday’s Nymex trading.
The earlier losses for gasoline came amid concerns that demand would show seasonal weakness as the summer ends.
Separately, an EIA report said consumption of gasoline, diesel, jet fuels and other petroleum products hit a record last year as increased demand in Asia outweighed falling demand in Europe and North America.
On the supply side, analysts expected a 1.5-million-barrel drop in U.S. gasoline inventories for the previous week, according to Platts.
For distillates, including heating oil, the Platts survey tipped a 1-million-barrel rise.
In Tuesday trade, September heating oil was flat at $3.08 a gallon.
September natural gas NGU13 -1.65% retreated a nickel, or 1.4%, to $3.46 per million British thermal units. The contract is due to expire at the close of Wednesday’s Nymex session.
William L. Watts is MarketWatch's senior markets writer, based in New York. Follow him on Twitter @wlwatts.
Sara Sjolin is a MarketWatch reporter based in London. Follow her on Twitter @sarasjolin.
