NEW YORK: Global oil prices fell yesterday, after US and Russian officials reached a weekend deal to remove Syria’s chemical weapons, easing investor worries.
Iran’s new atomic energy chief said his country wanted to settle a decade-old nuclear dispute with the West, and this also pressured oil prices.
“The market is clearly taking out the risk premium it had afforded to the potential of military action” on Syria, said Andy Lebow, Vice-President at Jefferies Bache in New York. He also cited Iran’s softer tone as a factor pulling Brent down.
US President Barack Obama said he would retain the military option if Damascus fails to follow a U N disarmament plan drawn up by Washington and Moscow. On Sunday, Syrian warplanes and artillery bombarded rebel suburbs of the capital.
Brent crude for delivery in November fell by $1.52 to $110.18 by 1.44pm EDT (1744 GMT), paring losses after dropping $3 to hit $108.73, its weakest level since August 12.
US oil for October delivery fell by $1.22 a barrel at $106.99 after hitting a low of $106.10 earlier in the session.
Brent’s premium over US crude fell to $3.19. During the session it hit a low of $2.94, the smallest premium since August 20.
Brent crude has fallen by $7 from a six-month high of $117.34 a barrel, hit in late August on worries about a possible US military strike against Syria and unrest in Libya that sent production there to a post-war low of 150,000 barrels per day.
RBOB gasoline futures fell by around five cents to $2.719 per gallon, as a seasonal change in specifications for delivery in the New York harbour from summer grade to winter grade gasoline left the market plentifully supplied with both grades.
“It’s a combination of plentiful supplies and the fact that you can’t put the excess summer grade into storage,” said Stephen Schork, editor of The Schork Report in Villanova, Pennsylvania.
On Monday, a spokesman for Libyan protesters denied Libyan media reports that striking workers in the east of the country had reached a deal to reopen export terminals. The decline in oil prices despite a weak dollar, which usually bolsters dollar-denominated oil prices. The dollar hovered near a near four-week low after former US Treasury Secretary Lawrence Summers withdrew his name as a candidate to lead the Federal Reserve.
Markets perceive Summers as relatively hawkish, and his withdrawal suggests there could be a more gradual approach to tightening monetary policy.
“The Larry Summers story shows you how dependent we are on our monetary policy, and how hard it’s going to be to get off that,” said Phil Flynn, an analyst at the Price Futures Group in Chicago, Illinois. US industrial production rose in August as a bounce back in motor vehicle assembly lifted manufacturing output, a hopeful sign for the economy after growth got off to a slow start in the third quarter.
“The industrial production number brought us back up on the demand side a little bit,” added Flynn.
The Federal Open Market Committee is meeting for two days beginning today.