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Oil prices staged a rally on Wednesday partly due to the escalating turmoil in the Middle East, and analysts who expect the strife to worsen are recommending oil stocks as “a great place to be.”
The situation in the Middle East is likely to deteriorate from here and drive oil higher, Michael Crofton, President and CEO of Philadelphia Trust Company, told CNBC. Syria’s Foreign Ministry acknowledged on Wednesday that it had chemical and biological weapons that the country could use if other nations intervened in its civil war.
September NYMEX WTI oil futures climbed from an intraday low of $86.84 to settle 47 cents higher at $88.97 a barrel, and Brent Crude futures rising to over $104.50 a barrel.
“I think oil stocks are a great place to be because of my feeling that the Middle East is going to have a significant problem sometime in the next 18 months,” Crofton said. The government in Syria is close to collapse after a prolonged civil war and there may be civil unrest in Egypt as the military regime in Egypt could be unwilling to give up power amid a leadership transition.
“And if any of those, or multiple of those possibilities occur, then we got a wider conflict in the Middle East which is going to drive oil prices through the roof. So if you can get some domestic [U.S.] oil, you’re in good shape,” Crofton said.
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