Oil prices rise above US$117 a barrel on possible Syria strike

REUTERS - Oil rose more than US$2 a barrel on Wednesday, with Brent pushing above US$117 (S$150.2)and the United States benchmark soaring to its highest in over two years, amid worries a possible military strike by Western powers against Syria could hit Middle Eastern crude supply.

The United States and its allies have told the Syrian opposition to expect military action soon against President Bashar al-Assad's forces, which were blamed for last week's chemical weapons attacks.

"Assuming they take action, it's likely for the risk premium to be built in for quite a while," Mr Ric Spooner, chief market analyst at CMC Markets in Sydney, said, referring to oil prices.

Brent had jumped to a 6-month high of US$117.23 a barrel by 0345 GMT, while US crude hit an intraday high of US$111.75 - its loftiest since May 2011.

Oil prices have gained US$5-US$6 so far this week on worries tensions in Syria could spill over and destabilize the Middle East, which pumps a third of the world's oil.

The risk premium could vary from US$10 to US$25, Mr Spooner said, adding that if the situation worsens Brent could rise to US$119-US$126 while US crude could move toward US$114-US$115.

A prolonged outage at several Libyan oilfields has also underpinned prices.

Libya's largest western oilfields closed when an armed group shut down the pipeline linking them to ports, its deputy oil minister said on Tuesday.

Total Libyan oil output would be just under 200,000 barrels per day (bpd) from pre-war levels of around 1.6 million bpd, according to a Reuters estimate, the worst disruption since the civil war in 2011.

"While the events in Syria have little impact on oil prices in isolation, the potential impacts flowing through to the rest of the region are high while sectarian violence continues in Iraq and supplies from Nigeria, Libya and Sudan continue to disappoint," ANZ analysts said in a note.

Oil could also get another boost if the US Federal Reserve decides to start paring back its bond purchases later than the anticipated September timeline.