(See EXTRA for more on the Syrian conflict.)
Sept. 10 (Bloomberg) -- Gasoline tumbled to a 10-week low as crude oil futures sank on speculation the U.S. will not strike Syria.
Futures dropped 2.4 percent. France said it will submit a Russian-backed plan to confiscate Syria’s chemical weapons to the United Nations, as Interfax reported that Bashar al-Assad’s government accepted the proposal. President Barack Obama asked Democratic senators to delay a vote on authorizing military strikes in Syria to allow time for talks on eliminating that country’s chemical weapons, lawmakers said today.
“The market is reacting to a potential diplomatic solution to the Syria crisis, which is taking a potential war premium out of the price,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “There are still several more dollars of war risk premium in the market.”
Gasoline for October delivery fell 6.67 cents, or 2.4 percent, to $2.7357 a gallon on the New York Mercantile Exchange, the lowest settlement since June 26. Trading volume was 24 percent above the 100-day average at 2:47 p.m.
Gasoline has dropped 13 percent since settling at $3.1343 on July 16. The summer driving season traditionally ends on Labor Day, which this year fell on Sept. 2. Winter-grade fuel, which the October contract represents, can be blended from a wider range of products.
The decline is “not surprising post-Labor Day during shoulder period when October contracts are trading,” said Jason Schenker, president of Prestige Economics LLC in Austin.
West Texas Intermediate crude for October delivery, which on Sept. 6 reached the highest level since May 2011, dropped $2.13, or 1.9 percent, to $107.39 a barrel on the Nymex. October Brent crude sank $2.47 to $111.25 on the London ICE Futures Exchange.
“This is deflating the geopolitical risk that had been priced in,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The market will go back to stabilizing and reacting to other headlines.”
Obama is scheduled to address the nation tonight to make his case for a military strike. The president has asked senators to “keep the threat of credible military action available,” Democratic Senator Tom Carper of Delaware said after senators met privately with the president.
Gasoline has dropped more than 4 percent in two days amid reduced concern of a U.S. limited strike against Syria in retaliation for its alleged use of chemical weapons against civilians and as motor fuel inventories were above-average for the time of year.
Demand for the motor fuel in the four weeks ended Aug. 30 was 0.3 percent below a year earlier, according to data from the Energy Information Administration. Inventories were 8.6 percent above a year earlier.
Gasoline inventories probably fell 1 million barrels last week, according to the median estimate of 12 analysts in a survey by Bloomberg. The decline comes as refinery utilization dropped 0.9 percentage point to 90.8 percent, the survey showed. The EIA is scheduled to report last week’s inventories at 10:30 a.m. tomorrow in Washington.
The motor fuel’s crack spread versus West Texas Intermediate crude narrowed 67 cents to $7.51 a barrel. The spread has dropped 45 percent this month. The fuel’s premium over Brent slipped 33 cents to $3.65, 50 percent lower than on Aug. 30.
“We’ve pretty much eroded the Syria premium at the moment, said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. ‘‘Support for gasoline will come from refinery maintenance and the widespread run cuts that are taking place because of extremely weak margins.’’
Sen estimates planned maintenance on the Gulf Coast, Midwest and East Coast will reduce daily capacity by 1.42 million barrels in September, 795,000 barrels in October and 170,000 barrels in November.
Pump prices, averaged nationwide, fell 0.6 cent to $3.564 a gallon, 26.4 cents below a year ago, Heathrow, Florida-based AAA said today on its website.
Inventories of distillates, including heating oil and diesel, increased 600,000 barrels last week, according to the survey.
Ultra-low-sulfur diesel for October delivery fell 5.15 cents, or 1.7 percent, to $3.0668 a gallon, the lowest settlement since Aug. 14. Trading volume was 2.8 percent below the 100-day average at 3 p.m.
ULSD’s crack spread versus WTI narrowed 3 cents to $21.42 a barrel while the premium over Brent increased 31 cents to $17.56.
--With assistance from Terry Atlas, David Lerman and Kathleen Hunter in Washington. Editors: David Marino, Richard Stubbe