By Dmitry Zhdannikov and Ikuko Kurahone
LONDON (Reuters) - High world oil futures prices could rise yet further if the European Union puts sanctions on Syrian oil this week, although the country exports modest amounts and the quality is low, analysts and traders said.
"The physical market impact is very small. But the current futures market is bullish so even if 50,000 barrels per day (bpd) go out, prices will go ballistic," an oil trader with a major bank said Thursday.
The European Union will discuss in Brussels Friday possible sanctions against Syria's leadership over its crackdown on protesters, EU diplomats have said.
Any sanctions would probably begin with asset freezes and travel bans on the leadership and it could take up to two weeks before the measures formally pass into law. If measures are taken against the leadership, state oil export monopoly Sytrol is likely to be affected.
Syrian security forces have shot dead at least 400 civilians in their campaign to crush month-long pro-democracy protests, Syrian human rights organizations have said.
The United States is also considering sanctions against Syrian government officials to increase pressure on President Bashar al-Assad to end the crackdown.
"Pressure on Syrian elites keeps mounting... However, a condemnation of Syrian actions by the U.N, Security Council has so far been thwarted by Russia, China and Lebanon," said David Wech from JBC Energy.
Syrian crude oil output was around 400,000 bpd in 2010 compared with a peak of around 600,000 bpd in the 1990s. Today's volumes are only a fraction of Libya's output of 1.6 million bpd or around 2 percent of the global consumption, which has been shut by sanctions and a civil war since March.
RUSSIAN CRUDE TO GET SUPPORT
A key difference with Libya is that Syria exports mainly sour and heavy crude, which is harder to process than the sweet and light Libyan oil that yields more light products such as gasoline and gasoil.
U.S. and Brent oil futures, as well as premiums on sweet versus sour grades, have rallied since March after Libya stopped exporting its predominantly sweet barrels.
Brent oil futures traded above $125 a barrel Thursday, not far from their highest level since August 2008.
"This would mean that a possible shut-in would not be too dramatic for the European crude market as it would be relatively easy to find substitutes for Syrian Heavy, particularly as there is plenty of sour crude available in the region, something that cannot be said for light-sweet grades," Wech said.
Syria's two key production streams are the sour and heavy Souedie crude, which yields lower quality products, and the sweet and lighter Syrian Light grade.
More than half the output is processed at domestic refineries, which can refine around 240,000 bpd, while some 150,000 bpd or around 6 tankers a month of mostly sour Souedie is exported mainly to Italy, the Netherlands, France and Spain.
An Italian refiner said interest in the Souedie grade was low as the official selling price of minus $10.6 per barrel to the benchmark dated Brent was still too high, given the poor returns to be gained at present from refining heavy oil.
"This is a minor problem for the market since you don't have the physical tightness even despite Libya. But the very bullish futures market has long been ignoring fundamentals," said a trader at a trading firm in the Mediterranean.
The trader said Syrian exports would halt very quickly if sanctions were imposed on the country as international banks would quickly stop accepting payments, as they did with Libya.
"Although the impact on the physical market will be limited, some similar grades might benefit -- primarily (Russia's) Urals, (Iraq's) Kirkuk and Iranian Heavy," he said.
(Reporting by Dmitry Zhdannikov and Ikuko Kurahone, editing by Anthony Barker)