The price of oil briefly surged past $112 a barrel Wednesday before giving up most of its gains while the U.S. seemed to edge closer to intervening in Syria's civil war.
The U.N.'s special envoy to Syria, Lakhdar Brahimi, said Wednesday in Geneva that there was evidence that some kind of chemical "substance" had been used in an attack that may have killed more than 1,000 people near Damascus.
Brahimi also said that any military strike against Syria needed to gain approval from the 15-member U.N. Security Council.
U.S. Defense Secretary Chuck Hagel said Tuesday that American forces were ready to act on any order by President Barack Obama to strike Syria in response to the alleged use of chemical weapons in the conflict.
By early afternoon in Europe, benchmark oil for October delivery was up 97 cents to $109.98 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session, oil rose as high as $112.24.
On Tuesday, the Nymex contract jumped $3.09 to close at $109.01 a barrel. Still, the price remains far below its record close of $145.29 a barrel, reached on July 3, 2008.
The price of oil is has surged more than 15 percent in the last three months on concerns over the civil war in Syria and unrest in Egypt. Neither country is a major oil exporter, but traders worry that the violence could spread to more important oil-exporting countries or disrupt major oil transport routes.
"Syria's political-economic-military links to Iran, Hezbollah and Russia underline the threat of unintended chain-reaction resulting in wider regional instability. Threat of supply disruption is not insignificant," said Vishnu Varathan of Mizuho Bank Ltd. in Singapore in a market commentary.
Other analysts, however, said the developments in Syria were being used as an incentive to reconsider the status of the global oil markets -- with other factors accounting for rising prices.
A report from JBC Energy in Vienna said there was a "clear risk of an overreaction in the current situation," especially as Syria was only producing around 70,000 barrels of oil a day. Instead, it pointed to Libya's export cuts of at least 1 million barrels a day due to production outages and labor conflicts at shipping ports as a more probable price driver.
When Libya's oil production stopped completely during the revolution in 2011, oil rose by $20 a barrel over the span of two weeks.
While reports of ample global supplies were recently the norm, JBC Energy said current developments -- such as low spare capacity in Saudi Arabia, stockpiles falling in the U.S., disappointing supply developments around the world and signs of an improving global economy -- pointed to tighter markets.
"In sum, there are surely risks to the upside of oil prices, but they have not much to do with Syria, which has only been a catalyst for reassessing markets," JBC said.
Brent crude, the benchmark for international crudes, was up $1.20 to $115.56 a barrel on the ICE Futures exchange in London.
In other energy futures trading on Nymex:
-- Heating oil added 2.79 cents to $3.1935 per gallon.
-- Natural gas lost 1.4 cents to $3.52 per 1,000 cubic feet.
-- Wholesale gasoline rose 3.73 cents to $2.95 per gallon.
Pamela Sampson in Bangkok and John Heilprin in Geneva contributed to this report.
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