SAN FRANCISCO (MarketWatch) — Tensions over Syria continued to feed supply concerns in the Middle East on Wednesday, lifting futures prices for oil to a close above $110 a barrel even after the latest U.S. data showed an unexpected climb in the past week’s crude supplies.

Prices for West Texas Intermediate crude traded in New York logged their highest close in more than two years and one investment bank said Brent crude in London could surge to as high as $150 a barrel amid the crisis.

Oil markets are not trading based on the U.S. inventory data, and they probably won’t until the Syria situation plays out, said Tariq Zahir, managing member at Tyche Capital Advisors.

On the New York Mercantile Exchange, crude oil for October delivery CLV23, added $1.09, or 1%, to settle at $110.10 a barrel, after surging almost 3% Tuesday. In electronic trading overnight, the contract topped $112 a barrel.

The possibility of U.S. intervention in the Syrian civil war lifts Nymex oil futures above $110. Reuters

The settlement was the highest for a most-active Nymex crude contract since early May 2011, according to FactSet data.

Oil traded at around $109.90 shortly before U.S. government data on petroleum supplies were released Wednesday. After the data came out, prices pared gains then quickly recovered.

October Brent crude UK:LCOV3 added $2.25, or 2%, to close at $116.61 a barrel on ICE Futures, building on Tuesday’s 3.3% rally.

The gains continued a sharp upward trend that started with U.S. Secretary of State John Kerry saying on Monday that Washington believed the Syrian government had used chemical weapons against civilians. Read why oil could rise even without Syria tensions.

Oil has already been climbing a wall of worry based on Syria tensions and it could become a case of buy the rumor, sell the fact, said Phil Flynn, senior market analyst at Price Futures Group, “When the missiles fly, more than likely prices will drop,” he said.

Besides, the spike in prices will eventually hurt demand and increase the odds of a release from the U.S. Strategic Petroleum Reserve, he said.

With the U.S. weighing a possible strike against Syrian government, the Arab League on Tuesday called for an international response to the alleged gas attack on civilians, though they didn’t specifically endorse a unilateral U.S. action. Check out MarketWatch’s live streaming updates on the Syrian conflict.

“While Syria is not a major concern with oil supplies the biggest concern is a spillover to a wider conflict in the region,” said Zahir. “If Israel gets involved or [the turmoil] spreads to other nations in the region then we could be talking about a supply disruption.”

“Markets should be well supported on these fears,” he said, though oil could give back the gains it saw this week if the Syrian conflict is only minimal or doesn’t spread in the region. Read about why Syria worries oil traders.

Surprise U.S. supply climb

The Syrian concerns trumped the bearish influence from a surprise gain for U.S. crude-oil supplies last week.

On Wednesday, the U.S. Energy Information Administration reported an unexpected climb of 3 million barrels in crude stockpiles for the week ended Aug. 23. Analysts polled by Platts were looking for a decline of 250,000 barrels.

The American Petroleum Institute late Tuesday had reported that crude stocks rose by 2.5 million barrels last week.

The EIA also said that gasoline supplies fell by 600,000 barrels, while distillate stockpiles, which include heating oil, declined by 300,000 barrels. Gasoline stockpiles were expected to decline by 1.5 million barrels, while forecasts called for an increase of 1 million barrels for distillates.

On Nymex, September gasoline US:RBU3 tacked on 6 cents, or 2%, to $3.095 a gallon, on top of its 8-cent rally on Tuesday. An AAA spokesman said Tuesday that the rally in gasoline futures may mean higher prices at the U.S. pump.

September heating oil gained almost 5 cents, or 1.5%, to $3.21 a gallon after making its own 8-cent advance the previous day.

Brent at $150?

Société Générale’s global head of oil research, Michael Wittner, wrote in a note Tuesday that under the bank’s base-case scenario, in which an attack begins in the next week, Brent crude could rise by another $5 to $10, sending it to $120-$125 a barrel.

Syria vows to repel any U.S. attack

Under SocGen’s “upside scenario,” which includes “a significant supply disruption in Iraq or elsewhere,” Brent could hit $150.

However, Wittner added that any price spikes likely wouldn’t last, as Saudi Arabia could make up for the supply disruptions, and many oil-importing nations have strategic reserves they could use.

Rivkin global analyst Tim Radford agreed the gains were temporary but was more dismissive of the odds of a U.S. strike on Syria.

“It really is worst-case-scenario-type fear driving oil prices higher. And while the global press have been talking up a likely military strike by the West, it remains unlikely given the extremely sensitive nature of Syria’s political relationships,” Radford wrote in a note early Wednesday.

“Once certainty is restored by political leaders over the next few days, we should see speculative and fear-driven buying subside, leading to [Nymex] oil prices returning to levels prior to the U.S. Secretary of State John Kerry address on the Syrian chemical attacks, at around $107 a barrel,” Radford wrote.

Back on Nymex, natural gas turned higher, to follow the gains among its energy peers ahead of a weekly U.S. government supply update due Thursday.

Analysts surveyed by Platts expect the EIA to report an increase in natural-gas supplies of between 61 billion cubic feet and 65 billion cubic feet.

September natural gas US:NGU13 closed up 3 cents, or 0.9%, at $3.57 per million British thermal units. The contract expired at the close of the Nymex session.