LONDON: Brent crude fell below $109 a barrel yesterday as a deal averting any imminent US attack on Syria calmed fears of a disruption to Middle East oil supplies and after output resumed at a large oilfield in western Libya.
US air strikes on Syria now look unlikely after the pact to remove Syria’s chemical weapons, although the United States, Britain and France have warned President Bashar Al Assad of consequences if he fails to comply.
Oil supplies from Libya, hit this year by unrest and strikes, are set to recover after the government in Tripoli agreed a deal with protesters in the country’s west to allow pumping to resume from one major oilfield.
Investors are also wary over the market outlook ahead of a meeting of the US central bank, which is likely to signal tighter monetary policy and could strengthen the dollar.
“This Federal Reserve meeting is the most interesting for at least a year because it could mark the exit from ultra-loose monetary policy,” Commerzbank senior oil and commodities analyst Carsten Fritsch said.
“The market believes the US dollar will strengthen if monetary conditions are tightened, which would put some pressure on oil,” he added. Brent crude for delivery in November fell $1.40 a barrel to a near-one-month low of $108.67 and traded around $108.90 by 1345 GMT. The benchmark slid 2.4 percent on Monday, its steepest one-day decline since June 20, after the deal to strip Syria of chemical weapons.
US crude for October delivery was down 70 cents at $105.89 a barrel, after hitting a session low of $105.56, its weakest since September 3.
Brent has lost more than 7 percent since hitting a six-month peak of $117.34 in late August when a US military strike against Syria appeared imminent.
Libyan oil output is expected to rise to 400,000-450,000 barrels per day (bpd) as one of the biggest western oilfields, El Sharara, ramps up after workers resumed pumping on Monday, deputy oil minister Omar Shakmak said.
Oil production in Libya is still far below its pre-war level of 1.6 million bpd, but officials say output from other oilfields could resume soon.
Libyan Prime Minister Ali Zeidan said yesterday he wanted to solve the crisis in the oil industry through dialogue: “We are going to work on solving this problem,” Zeidan told a conference in London. “When blood is shed, the loss will be greater”.