(For more on the Syria conflict, see EXTRA <GO>)
Sept. 4 (Bloomberg) -- West Texas Intermediate fell as the U.S. debated a military strike on Syria and Russia raised objections to intervention, clouding the prospects for an attack that could heighten tensions in the Middle East.
Futures lost as much as 0.8 percent. The U.S. Senate Foreign Relations Committee is scheduled to vote today on a use- of-force resolution that sets a 90-day limit on military action and explicitly doesn’t authorize use of ground troops. Russian President Vladimir Putin said he will only support a United Nations resolution for military strikes if there’s conclusive proof the Syrian government used chemical weapons.
“The market sentiment on Syria is muted as it seems not all governments are gung-ho about action,” said Robert Montefusco, a senior broker at Sucden Financial Ltd. in London. “But everyone’s watching for the latest developments.”
WTI for October delivery dropped as much as 91 cents to $107.63 a barrel in electronic trading on the New York Mercantile Exchange and was at $108.05 as of 1:24 p.m. London time. The contract climbed 89 cents from the Aug. 30 close to settle at $108.54 yesterday. Floor trading was closed Sept. 2 for the Labor Day holiday. The volume of all futures traded was about 20 percent below the 100-day average.
Brent for October settlement was down 34 cents at $115.34 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $7.30 to WTI, compared with $7.14 yesterday.
WTI has swung in a range of more than $8 a barrel in the past week as signs of an imminent U.S. attack on Syria bolstered speculation the conflict will spread. Israel yesterday conducted what it described as a joint test with the U.S. of its Arrow Ballistic Missile Defense system over the Mediterranean, briefly rattling stock markets.
Putin said there should only be action against the Syrian government if there is “objective, precise evidence” that it was responsible for a chemical attack last month, according to the transcript of an interview with the Associated Press posted on the Kremlin website.
The Middle East accounted for about 35 percent of global crude 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.
Libya, holder of Africa’s biggest oil reserves, is not exporting crude and pumping remains limited to 200,000 barrels a day, Ibrahim Al Awami, the oil ministry’s director of inspection and measurement, said today. The country is losing $140 million a day because of worker strikes at ports, storage facilities and fields, state-run National Oil Corp. said yesterday.
Goldman Sachs Group Inc. cut its forecast for Libya’s crude output this month to 500,000 barrels a day from 1 million, according to a report dated yesterday. The OPEC nation produced 575,000 barrels a day last month, a Bloomberg survey of producers and analysts showed.
Crude stockpiles in the U.S., the world’s largest oil consumer, fell by 2 million barrels to 360 million barrels in the week ended Aug. 30, according to the median estimate of nine analysts in a separate Bloomberg survey before an Energy Information Administration report tomorrow.
Gasoline inventories probably dropped by 400,000 barrels, decreasing for a fourth week, the survey shows. Distillate supplies, a category that includes heating oil and diesel, are forecast to have increased by 1 million barrels.
The American Petroleum Institute in Washington is scheduled to release separate stockpile data today. The industry group 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.
Oil prices may decline in the fourth quarter as global demand growth remains “soft,” according to Barclays Plc. Brent, the benchmark for more than half the world’s oil, will average $105 a barrel while WTI will be $101, the bank said in an e-mailed report today.
Brent’s advance is stalling as a technical indicator shows futures may be rising too quickly for further gains to be sustainable. The 14-day relative strength index is near 68 today, according to data compiled by Bloomberg. A reading above 70 typically signals the market is overbought. Brent fell on Aug. 29 and Aug. 30 after the RSI climbed to more than 77.
--With assistance from Ben Sharples in Melbourne. Editors: Raj Rajendran, Bruce Stanley