More Fighting in Syria Supports Brent Prices
Brent crude oil held steadily below $111 on Wednesday morning, following President Obama's re-election Tuesday night.
Uncertainty about the election was weighing on prices over the past few days, and with the voting completed, many will be looking to the president to make a decision regarding the upcoming ‘fiscal cliff'. One of Obama's primary responsibilities will be to discuss this bundle of tax hikes and spending cuts set to kick in if the U.S. does not find a long term solution to its deficit by January 2013.
Many worry that this time sensitive issue will play out similarly to the heated debate over the debt ceiling in 2011. Crude oil has been quite sensitive to the issue, as it could send the number one oil consumer into a deep recession.
The U.S. deficit issues are only a small part of a larger demand concern affecting crude prices. China, although seemingly moving toward recovery, has seen slow progress toward expansion. In addition, trouble in the eurozone largely attributed to a financial crisis in Greece has got many investors expecting oil prices to remain low throughout the end of the year.
However, Reuters reported that escalating violence in the Middle East is supporting prices for fear of supply interruptions. The ongoing conflict in Syria reached a new level on Tuesday as explosions in Demascus killed and wounded dozens. During the bombing, gunmen also killed the brother of a parliament speaker.
This violence confirmed fears that the fighting would eventually affect oil supply, as one of the explosions damaged the main oil pipeline that feeds a Syrian refinery.
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