West Texas Intermediate dropped a second day after reports that Syria agreed to a Russian plan to surrender its chemical weapons, easing concern of a U.S. attack that may escalate the conflict and cut Middle Eastern exports.
Futures extended losses, declining as much as 2.1 percent, after Syrian state television said the country’s Prime Minister, Wael al-Halaqi, supported Russia’s disarmament initiative. President Barack Obama said yesterday in an interview with NBC News that Russia’s proposal is a “potentially positive development,” adding that he wasn’t confident of congressional approval for military action against Syria. The International Energy Agency said today that oil markets are sufficiently supplied without any emergency stockpile release.
“It’s generally thought they will look for a diplomatic solution to this problem,” said Frank Klumpp, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, Germany. “This is good for the oil market, because war is the threat that the market fears and pushes the political premium up.”
WTI for October delivery slid as much as $2.24 to $107.28 a barrel in electronic trading on the New York Mercantile Exchange, the lowest since Sept. 5, and was at $107.38 as of 1:43 p.m. London time. The volume of all futures traded was about 40 percent above the 100-day average.
Brent for October settlement decreased as much as $1.91, or 1.7 percent, to $111.81 a barrel on the London-based ICE Futures Europe exchange. That’s the lowest since Aug. 27. The European benchmark was at a premium of $4.53 to WTI. The spread was $4.20 yesterday, the narrowest since Aug. 19.
Syria agreed to the Russian proposal to put its chemical weapons under international control, Foreign Minister Walid al-Muallem said today during a meeting with Russian lower house of parliament speaker Sergei Naryshkin in Moscow, according to Interfax.
“Yesterday we had a round of very fruitful negotiations with Foreign Minister Sergei Lavrov and he proposed an initiative concerning chemical weapons. By the evening we agreed to the Russian initiative,” al-Muallem said. Syria took this step “to kick the ground from under the foot of American aggression,” the Syrian minister said in the report.
Brent advanced a fourth week last week amid concern of an escalation of the conflict. The U.S. says President Bashar al-Assad’s regime used sarin gas outside of Damascus on Aug. 21, killing more than 1,400 people.
Obama will make his case for U.S. action against Assad in an address to the nation at 9 p.m. Washington time. The Senate is expected to vote on the resolution by the end of the week. Passage in the House of Representatives may be tougher, given reservations expressed by lawmakers from both parties who say their constituents overwhelmingly oppose the resolution.
The Middle East accounted for about 35 percent of global oil production in the first quarter of this year, according to the IEA. Syria borders Iraq, the largest producer after Saudi Arabia in the Organization of Petroleum Exporting Countries.
It’s a “good sign” that crude prices have eased, Maria van der Hoeven, the IEA’s executive director, said at a conference in Tokyo today. None of the agency’s member states need to release crude from their emergency inventories, Hoeven said. The Paris-based IEA advises 28 industrialized countries such as the U.S., Germany and Japan.
“The point is we always monitor the situation,” she said. At this moment, we can see the market is sufficiently well supplied.’’
OPEC said the global oil market is “well-supplied,” and trimmed demand estimates for its crude in 2014 as production outside the group increases.
The group will need to provide an average 29.6 million barrels a day next year, reducing its estimate “slightly” from last month, the group said today in its market report. OPEC’s 12 members pumped about 600,000 barrels a day more than this level in August. OPEC boosted forecasts for output from other producers amid supply growth in the U.S., Mexico and Norway.
U.S. crude inventories probably declined by 2 million barrels to 358.2 million in the week ended Sept. 6, according to the median estimate of nine analysts surveyed by Bloomberg News before a report from the Energy Information Administration tomorrow. That would be the lowest level since Aug. 31, 2012.
Gasoline supplies fell by 1 million barrels, the survey showed. Distillate fuels, a category that includes heating oil and diesel, are expected to have increased by 500,000 barrels.
The American Petroleum Institute is scheduled to release separate inventory data today. The industry group collects stockpiles information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA, the Energy Department’s statistical arm, for its weekly survey.
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