Oil futures settled at their highest level in a month Monday, after escalating violence in Syria stoked concerns about a wider conflict that could imperil oil supplies in the region.
Light, sweet crude for June delivery settled 55 cents, or 0.6%, higher at $96.16 a barrel on the New York Mercantile Exchange, the highest front-month settlement since April 2. Brent crude on the ICE futures exchange rose $1.27, or 1.2%, to $105.46 a barrel.
Futures climbed following reports over the weekend that Israel had launched two air strikes against Syria, the latest sign that the two-year-old civil war is spilling over into neighboring countries.
Although Syria isn't a major oil producer, the fighting there has oil traders on guard for the possibility that it widens into a broader war affecting countries that do export major volumes of oil. Reports said Israel had struck weapons bound for the Lebanese militant group Hezbollah, a group that is closely associated with Iran.
"The market's just a little bit concerned with what's going on in the Middle East," said Pete Donovan, vice president at Vantage Trading, an oil options brokerage. "Syria is not so much the big oil producer, but geographically it's so close."
The U.S. was weighing its next steps after reports that chemical weapons had been used in the war. Ambiguities remained over who was behind their use, and President Barack Obama has said the U.S. needs more evidence before making a decision on any possible intervention.
U.S. and European officials said the U.S. has stepped up talks with Britain and France on possible military options in Syria. However, analysts say there is less political will for U.S. intervention this time compared with two years ago when the U.S. and European nations launched a no-fly zone that helped topple Libyan dictator Moammar Gadhafi. Oil prices rose sharply during that conflict, though Libya is historically a major oil producer and a member of the Organization of the Petroleum Exporting Countries.
Brent crude saw the biggest move Monday. The contract is seen as a global benchmark and is often more vulnerable to big moves based on geopolitical news. However, trading volumes of the contract were light due to a holiday in London, meaning Monday's steep gains might not have staying power once more traders return to the market.
Less than 400,000 lots of Brent crude futures traded hands Monday, while most days volumes are above 700,000 lots.
Front-month June reformulated gasoline blendstock, or RBOB, settled 4.03 cents, or 1.4%, higher at $2.8657 a gallon. June heating oil settled up 3.58 cents, or 1.2%, at $2.9202 a gallon.
Copyright (c) 2012 Dow Jones & Company, Inc.
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