Brent rose from its lowest level in two weeks amid speculation that risks of a U.S. attack against Syria and a threat to Middle Eastern oil exports remain even after President Barack Obama decided to delay military strikes.
Futures gained as much as 1.1 percent in London after losing the most in more than two months yesterday. Obama said in a televised speech that he asked Congress to delay a vote on the use of military force while the administration pursues a Russian proposal for Syria to surrender its chemical arms. Brent’s recent sell-off is overdone as there are no signs of improvement in Libyan crudeproduction, Goldman Sachs Group Inc. said.
“The tensions with Syria have been eased but they haven’t been removed,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “The market is taking a second look today, as military strikes have been taken off the table but obviously could return if there’s no progress” with diplomatic options.
Brent for October settlement rose as much as $1.24 to $112.49 a barrel on the London-based ICE Futures Europe exchange. It closed at $111.25 yesterday, the lowest since Aug. 26. The European benchmark crude was at a premium of $4.56 to West Texas Intermediate. The spread shrank for a fourth day yesterday to $3.86, the narrowest since Aug. 19.
WTI for October delivery rose as much as 61 cents to $108 a barrel in electronic trading on the New York Mercantile Exchange and was at $107.68 as of 10:56 a.m. London time. The contract dropped 1.9 percent to $107.39 yesterday, the lowest close since Sept. 4. The volume of all futures traded was about 4 percent less than the 100-day average.
Brent advanced a fourth straight week last week amid concern that the conflict in Syria would escalate. The U.S. says Assad’s regime used sarin gas outside of Damascus on Aug. 21, killing more than 1,400 people.
Obama spent much of his 16-minute address repeating his arguments for the use of force to deter any future use of chemical weapons. He also pledged to explore a proposal backed by Russia to rid Syria of its chemical stockpiles.
“The WTI price growth is the standard rebound, as traders are opportunistically buying at the low,” said Andrey Kryuchenkov, global commodities strategist at VTB Capital in London. “The situation around Syria doesn’t change much, that’s why I don’t think the oil price growth will be sustainable.”
President Bashar al-Assad’s government has agreed to the plan to give up the weapons, the Interfax news agency yesterday cited Syrian Foreign Minister Walid al-Muallem as saying. France said it will submit a plan to the United Nations to confiscate the country’s chemical weapons.
The Middle East accounted for about 35 percent of global oil production in the first quarter of this year, according to the International Energy Agency. Syria borders Iraq, the biggest producer after Saudi Arabia in the Organization of Petroleum Exporting Countries.
In Libya, worker strikes at oil ports, terminals, storage facilities and fields have curbed output to about 150,000 barrels a day, Jeffrey Currie, a New York-based analyst at Goldman Sachs, said in an e-mailed report today. The bank maintained its near-term forecast at $115 a barrel.
Crude inventories in the U.S., the world’s largest oil consumer, fell by 2.93 million barrels in the week ended Sept. 6, the American Petroleum Institute reported yesterday.
The Energy Information Administration will release separate data today that will probably show supplies dropped by 2.1 million barrels, according to the median estimate of 12 analysts surveyed by Bloomberg News.
Gasoline stockpiles increase by 195,000 barrels, the industry-funded API said. The government report may show they slid by 1 million barrels, according to the survey. Distillate fuels, including heating oil and diesel, rose 807,000 barrels, compared with a projected 600,000 gain in the survey.
The API collects supply information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA, the Energy Department’s statistical arm, for its weekly survey.