Brent crude advanced a second day before talks between the U.S. and Russia to resolve the crisis in Syria, a conflict that has sparked concern Middle Eastern oil supplies may be disrupted.
Futures rose as much as 0.9 percent as Russian Foreign Minister Sergei Lavrov and U.S. Secretary of State John Kerry were to meet in Geneva today to discuss a plan for Syria to surrender its chemical weapons. Prices jumped after the Israeli army reported that two shells fired from Syria hit the southern Golan. The International Energy Agency cut estimates for the amount of crude OPEC will need to provide next year as supplies from North America surge.
“The market has a good entry point to go long oil again as the Syrian issue is far from being solved,” said Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas SA in London. “Perhaps we are just postponing an inevitable re-escalation in tension.”
Brent for October settlement gained as much as 96 cents to $112.46 a barrel on the London-based ICE Futures Europe exchange, and was at $112.17 as of 1:11 p.m. London time. The more actively-traded November contract was up 76 cents at $110.95. October futures will expire tomorrow.
The front-month European benchmark crude was at a premium of $3.81 to West Texas Intermediate. The spread widened yesterday for the first time in five days to $3.94.
WTI for October delivery was at $108.45 a barrel in electronic trading on the New York Mercantile Exchange, up 89 cents. The volume of all futures traded was about 10 percent less than the 100-day average.
Demand for crude from the Organization of Petroleum Exporting Countries in 2014 will be 29.2 million barrels a day or 1.3 million lower than the group’s current production levels, the IEA said today in its monthly market report.
Saudi Arabia Oil Minister Ali Al-Naimi said at a conference in Seoul today that the global crude market is well-supplied and geopolitical concerns are dominating. OPEC’s Secretary-General Abdalla El-Badri echoed similar views at the same event and said there’s no need for the 12-member group to act, even as Libya’s output dropped because of worker strikes.
Brent gained amid concern that the conflict in Syria will escalate and disrupt Middle East oil supplies. 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.
The Middle East accounted for about 35 percent of global oil output in the first quarter of this year, according to the IEA. Syria borders Iraq, OPEC’s biggest producer after Saudi Arabia.
Crude stockpiles at Cushing, Oklahoma, the delivery point for New York-traded futures, decreased by 639,000 barrels to 34.1 million in the week ended Sept. 6, according to data from the Energy Information Administration. Supplies shrank for a 10th week, matching the longest stretch in almost two years.