West Texas Intermediate fell for a second day as U.K. lawmakers rejected a motion for military action against Syria, reducing the prospect of an imminent strike and easing concern of disruption to Middle East exports.
Futures slid as much as 1.9 percent in New York, trimming this week’s advance to 1.4 percent. The U.K. House of Commons rejected a proposal put forward by Prime Minister David Cameron seeking a military response to what he says is evidence of the use of chemical weapons by Syria. The global oil market is adequately supplied and doesn’t require the release of emergency stockpiles, according to the International Energy Agency.
“U.K. participation in a Syria strike looks pretty unlikely in the near future,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London. “There will probably be a U.S. airstrike, but then the civil war will continue, and Brent will go back below $110.”
WTI for October delivery dropped as much as $2.05 to $106.75 a barrel in electronic trading on the New York Mercantile Exchange and was at $107.85 at 1:32 p.m. London time. The contract lost 1.2 percent yesterday, declining from the highest close since May 2011. Prices are up 2.7 percent in August, poised for a third monthly gain.
Brent for October settlement was at $114.75 a barrel, 41 cents lower on the London-based ICE Futures Europe exchange, having earlier lost as much as $1.53. The European benchmark’s premium to WTI was last at $6.88 and earlier today reached $8.41 a barrel, the strongest since June 10.
Societe Generale SA said Brent prices may surge as high as $150 if the Syria conflict spreads and disrupts supply from the region, according to an e-mailed report on Aug. 28. Brent traded at $147.50 on July 11, 2008, the highest intraday price on record.
Brent has technical resistance along a long-term downtrend line on the monthly chart, according to data compiled by Bloomberg. This line, connecting the closing prices of July 2008 and March 2012, is at about $116 a barrel this month. Sell orders tend to be clustered around chart-resistance levels.
WTI may increase next week on the prospect of an attack against Syria, according to a slim margin in a Bloomberg survey of 37 analysts and traders. Sixteen, or 43 percent, forecast futures will gain through Sept. 6, while 15 respondents predicted a drop and six said there will be no change.
President Barack Obama’s administration is struggling to marshal conclusive evidence backing its assertion that President Bashar al-Assad was directly responsible for the alleged chemical attacks last week near Damascus, according to three intelligence officials familiar with the situation. The U.S. won’t act without allies, Defense Secretary Chuck Hagel said.
The Middle East accounted for about 35 percent of global oil production in the first quarter of this year, according to data from the International Energy Agency. Syria shares a border with Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries.
The IEA is monitoring the market and “stands ready” to respond if there’s a major supply disruption, and the immediate release of stockpiles is not required, the adviser to 28 energy-consuming nations said in an e-mailed statement yesterday.
The Paris-based agency coordinated the release of 60 million barrels of crude and refined products in June 2011 to offset lost shipments from Libya, where an uprising against Muammar Qaddafi almost halted the country’s oil exports. Brent fell 8 percent in the two days after the announcement of that intervention, the third use of reserves in the IEA’s 39-year history.
Saudi Arabia, OPEC’s top producer, will probably keep its output in September at similar levels to this month and July, according to a person with knowledge of the kingdom’s oil policy.
The world’s biggest crude exporter produced 10.03 million barrels a day in July, and taking into account inventory movements it supplied 9.9 million barrels a day to the market that month, the person said, asking not to be identified because the matter is confidential. Separately, a Bloomberg monthly survey published yesterday showed the kingdom’s August production at an average rate of 9.95 million barrels a day.