West Texas Intermediate crude dropped for a fourth day to the lowest price in more than six weeks amid output gains and speculation that a United Nations mandate will ease the threat of a U.S. military strike on Syria.
Futures were down as much as 0.9 percent after closing yesterday at the lowest since Aug. 8 as the Security Council worked toward an agreement to disarm Syria’s chemical weapons. Production in Texas climbed in June to the most in 32 years, while Nigeria restored some oil supplies as pipelines sabotaged by vandalism and theft were repaired. Saudi Arabia will meet any shortage in the market, according to the kingdom’s oil minister.
“Today is another selloff and it seems like the oil market is under pressure this week,” Myrto Sokou, an analyst in London at Sucden Financial Ltd., a commodities broker. “The risk premium on Syria has dissolved.”
WTI for November delivery dropped as much as 89 cents to $102.70 a barrel and was at $102.76 in electronic trading on the New York Mercantile Exchange as of 1:40 p.m. London time. The volume of all futures traded was 21 percent less than the 100-day average. Prices have gained 6.4 percent this quarter, the most in a year, and are up 11.9 percent in 2013.
Brent for November settlement slid 18 cents to $107.98 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude widened for a third day to a premium of $5.24 to WTI, the most since Sept. 6.
Growing production from Eagle Ford, the nine fields that make up the majority of shale reserves in south Texas, is helping fuel a revival in the state’s crude output. Texas pumped 2.58 million barrels a day in June, the highest monthly level since May 1981, according to the Energy Information Administration, the Energy Department’s statistical arm. The EIA hasn’t released July output data for the state.
U.S. crude inventories shrank by 800,000 barrels in the week ended Sept. 20, the lowest in 18 months as refineries maintained operations at more than 90 percent of capacity and oil imports slipped, according to the median estimate of nine analysts surveyed before a report tomorrow from the EIA, the Energy Department’s statistical unit. That would leave stockpiles at 354.8 million, the least since March 2012.
The industry-funded American Petroleum Institute is scheduled to release supply data today.
Crude prices are currently driven by geopolitics and don’t reflect supply and demand balances, Saudi Arabia’s Oil Minister Ali al-Naimi told reporters in Riyadh today.
The UN Security Council is set to negotiate a Syria resolution as world leaders travel to New York for the opening of the General Assembly. The U.S., the U.K. and France have accused government forces of carrying out a chemical attack on Aug. 21 that killed 1,400 people near Damascus. Syrian President Bashar al-Assad has blamed rebel groups. Russia rejected a plan to include enforcement in the resolution.
Oil rose to a two-year high on Aug. 28 amid concern that a U.S.-led assault would widen the Syrian conflict and disrupt Middle East shipments. Syria borders Iraq and is near Iran, which together control almost a fifth of the production capacity in the Organization of Petroleum Exporting Countries, according to data compiled by Bloomberg.
Output in Nigeria, Africa’s largest crude producer, increased to 2.4 million barrels a day after sabotaged lines were restarted, Tumini Green, a spokeswoman at Nigerian National Petroleum Corp., said in an e-mailed statement. Supply dropped to 2.2 million in the first quarter, according to the state-owned company.
“We are a little bit more relaxed about the Middle East risk,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. With “supply increases in Libya and Nigeria, crude prices are under pressure in recent days. We may see WTI move back to under $100.”