UN Holds Peace Talks for Syria, But How Will This Impact Crude?


Jan. 27 2016, Updated 3:05 p.m. ET

UN peace talks focus on Syria

The January 2016 UN (United Nations) peace talks on the conflict in Syria are set to start on Friday, January 29. The rebel opposition group has indicated that it would boycott the talks, which had sought to represent some of their political conditions and motivations. But the marathon talks on Syria will proceed as planned in an effort to arrive at a political solution to the worsening civil war crisis in Syria.

[marketrealist-chart id=1001051]

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Implications for crude and the energy sector

Beyond the sociopolitical ramifications of the UN talks on Friday, the talks could also impact investors in crude oil and the energy sector. Any derailment from the proposed goal in the talks may impact the price of exploration and production companies in the oil and gas sector.

If the talks succeed and arrive at peaceful solutions, however, we may end up seeing a subsequent upside in the price of crude oil. That said, unless Saudi Arabia, Russia (RSX), and Iran can find some common ground, no political solution will be achievable, which will impact crude as well. If these nations do find common ground, they could make a deal that would potentially reduce the current glut in global crude oil supply.

This series will focus on the following:

  • understanding the civil war situation in Syria
  • examining how the civil war in Syria has impacted crude oil price
  • asking why Russia is in Syria
  • deciding whether a political solution in the region is achievable due to economic constraints
  • analyzing the moving averages of different energy streams, including renewable

Multiyear lows for US oil since October

Since October 2015, the US Oil Fund (USO) has fallen by 38% to date (as of January 25, 2016). The graph above shows the performance of USO since October 2015 to date. Investors would do well to note that the first airstrike on Syrian land by Russian aircraft happened on October 1, 2015. Since then, crude has tested multiyear lows.

Amid the volatile crude environment, E&P (exploration and production) companies have also come under financial pressure. ConocoPhillips (COP), Pioneer Natural Resources (PXD), and Apache Corporation (APA) represent large-capped, US-based upstream companies.

Continue to the next part of this series for a broader explanation of the civil war in Syria.


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