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Syria – Peace Deal Could Lower Crude Oil Price Further

Energy Select Sector SPDR

In recent months there has been a surge in efforts to end the bitter conflict in Syria, with world powers working together to reach an agreement. Some rebel groups in Syria have been heavily backed by the US, Turkey, Saudi Arabia & other European and gulf states. Assad has been reliant on allies such as Russia and Iran to maintain control over a sizable amount of territory in Syria, with around 70% of the population living within areas held by his forces.  Within the past week, improvements in relations between the US and Iran 

have been reinforced after Iran swiftly released several US personnel who were left stranded in Iranian waters. 

There is no guarantee that a peace deal will be reached, but it is certainly a much more likely prospect than it was a year ago. Syria itself is not a large oil producer/exporter, but the overall stability of the region does affect the value of crude oil. It is no surprise that stability in the Middle East is a major determinant of the value of crude oil, as the region is home to huge oil reserves. A peace deal in Syria (and its successful implementation) would lead to a more stable Middle East, potentially lowering the price of oil further.

Oil - SyriaThe value of a barrel of crude oil has plummeted in recent months, reaching a 12 year low (this is partly down to the economic slowdown in China.)  Some analysts have already predicted that oil could go below $10 a barrel. This was completely unthinkable just a
while ago, with increasing instability in the Middle East due to the rise of ISIS, the ongoing wars in Syria and Yemen, as well as the general volatility of the region.

It is virtually impossible to predict if a more stable Syria will result in a significant drop in the value of crude oil, but it will certainly be a factor. It could of course be counteracted by more instability in Yemen or Iraq, or perhaps other unforeseen circumstances. 

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