Crude oil price reaches 28-month high

The crude oil price continued to climb as the prospect of an escalation in the Syrian conflict worried markets. The price of the benchmark, West Texas Intermediate, closed at US$110.53. Some analysts believe prices could soar above US$150 a barrel if the Syria conflict were to spread across the oil-rich Middle East.

Syria itself is not a significant oil producer — estimates suggest it currently produces around 100,000 barrels of oil a day compared to an estimated 400,000 prior to its civil war. However, the country’s location does have strategic value to both Russia and the United States in terms of energy supply, distribution and logistics.

The crude-price spike is not just a consequence of the Syrian conflict. Oil prices have steadily risen since July, in part due to unrest and war in Egypt, Libya and Iraq. Egypt controls access to the Suez Canal, the world’s key oil supply and distribution route. Libya and Iraq are two major oil producers, with both still suffering uncertain futures and political risk.

Any price spike would likely benefit Australia’s major producers of the black gold. Those include Woodside Petroleum (ASX: WPL), Beach Energy (ASX: BPT) and Santos (ASX: STO).

Foolish takeaway

Being overweight on energy stocks looks a sensible play for oil investors looking to benefit from the security of Australia’s major producers. Recent falls in the Australian dollar provide an additional tailwind to companies producing commodities that earn US dollars. Overall, these companies look to have solid long-term prospects.

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Motley Fool contributor Tom Richardson does not own shares in any of the companies mentioned in this article.

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