WTI Fluctuates as China Expansion Counters Syria Impasse

West Texas Intermediate crude fluctuated as signs that manufacturing in China expanded the most since March countered easing concern Syria’s conflict will spread and disrupt oil supplies.

Futures were little changed after a 1.6 percent slide on Sept. 20 capped a second weekly loss. A preliminary Chinese manufacturing index rose to a six-month high, while a separate measure of European industrial activity today showed services expanded more than forecast while manufacturing was below expectations. Russia rejected a U.S. and European plan to include the threat of force in a United Nations Security Council agreement on disarming Syria’s chemical weapons.

“There are no real drivers to oil this week and certainly the upside should remain fairly limited,” said Michael Hewson, a London-based market analyst at CMC Markets Plc, who forecasts Brent to drop to $106 a barrel by the end of the week. “The European data was mixed and the oil price looks too high due to a Syria premium, which is starting to melt away.”

WTI for November delivery was at $104.70 a barrel in electronic trading on the New York Mercantile Exchange, down 5 cents, as of 1:02 p.m. London time. The October contract, which expired on Sept. 20, closed at $104.67, the lowest settlement since Aug. 21. The volume of all futures traded was about 25 percent less than the 100-day average. Prices have gained 8.8 percent this quarter and 12 percent so far this year.

Brent for November settlement fell 21 cents to $109.01 a barrel on the London-based ICE Futures Europe exchange. The European benchmark was at a premium of $4.30 to WTI, compared with $4.47 on Sept. 20.

China Manufacturing

The preliminary September reading of 51.2 for China’s Purchasing Managers’ Index, released today by HSBC Holdings Plc and Markit Economics, beat the 50.9 median estimate of 14 economists surveyed by Bloomberg. It was at 50.1 in August. Separately, an official gauge for the euro region showed manufacturing growth at 51.1, less than the forecast of 51.7.

China accounted for about 11 percent of global oil consumption last year, compared with 14 percent for the European Union and 21 percent for the U.S., according to BP Plc’s Statistical Review of World Energy.

The U.S., France and the U.K. want a UN resolution this week that provides enforcement of the terms of the Sept. 14 Geneva accord between the U.S. and Russia to rid Syrian President Bashar al-Assad’s regime of chemical weapons. The three Western nations have accused government forces of a sarin gas attack on Aug. 21 that killed 1,400 people near Damascus.

‘Irresponsible, Unprofessional’

The U.S.-European plan to include threats of force in any resolution is “irresponsible and unprofessional,” according to Russian Foreign Minister Sergei Lavrov.

The countries want to “drive through a resolution based on force” and that blames al-Assad for everything, he said in an interview with Russia’s Channel One, which was published on the Foreign Ministry’s website yesterday.

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, Bloomberg estimates show.

Bullish Bets

Hedge funds and other large speculators cut bullish wagers on WTI by 9,099 futures and options contracts combined, or 3.1 percent, to 280,959, in the week ended Sept. 17, the U.S. Commodity Futures Trading Commission said it in weekly Commitments of Traders report on Sept. 21. The ICE exchange will release similar data for Brent at midday London time.

In Libya, oil production climbed to more than 600,000 barrels a day and all fields in the west of the country are producing, Sliman Qajam, the deputy head of the parliament’s energy committee, said yesterday in a phone interview in Tripoli. Supply from the OPEC member has rebounded from as low as 150,000 barrels earlier this month, compared with a 2013 high of 1.4 million in April, according to the IEA’s monthly report on Sept. 12. Five of the nation’s nine export terminals were operating as of Sept. 19.

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