(See EXTRA for more on the Syrian conflict.)
Sept. 17 (Bloomberg) -- West Texas Intermediate crude fell to the lowest level in almost four weeks as a U.S. agreement with Russia to eliminate Syria’s chemical weapons reduced supply risk and on speculation that the Federal Reserve will start tapering stimulus measures.
Prices slid for a third day. Secretary of State John Kerry said the U.S. isn’t softening its opposition to Syrian President Bashar al-Assad by making a diplomatic deal. Fed policy makers meeting today and tomorrow may pare the monthly pace of bond purchases used to bolster the economy. Crude also decreased as Libya opened two oil-export ports.
“Prices are weakening as Syria isn’t an imminent threat anymore,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “A lot has to do with the Fed meeting that’s coming up. We have room to go lower and I see a possibility for WTI to drop down to $104 in the short term.”
WTI for October delivery declined $1.17, or 1.1 percent, to $105.42 a barrel on the New York Mercantile Exchange, the lowest settlement since Aug. 22. The volume of all futures traded was 23 percent above the 100-day average at 4:53 p.m.
Prices were little changed after the American Petroleum Institute reported inventories dropped 252,000 barrels last week. Crude fell $1.07, or 1 percent, to $105.52 a barrel in electronic trading at 4:53 p.m. It was $105.51 before the report was released at 4:30 p.m.
Brent for November settlement slid $1.88, or 1.7 percent, to $108.19 a barrel on the London-based ICE Futures Europe exchange. Volume was 15 percent above the 100-day average. The European benchmark’s premium to WTI shrank to $3.37, the narrowest level since Aug. 19 based on settlement prices.
There’s no conflict between sending international chemical- weapons experts to work with Assad’s regime and the “strategic goal” of ending his rule, Kerry said yesterday in Paris.
United Nations Secretary-General Ban Ki-moon yesterday briefed the Security Council on a report by an inspection team, which found “clear and convincing evidence” that the nerve agent sarin was used Aug. 21 near Damascus. Ban pressed the council to consider ways to enforce the U.S.-Russia plan, announced Sept. 14, to eliminate the toxic weapons arsenal.
“The risk of an imminent military conflict in Syria is coming down and it’s reducing the market premium,” said Rich Ilczyszyn, chief market strategist and founder of commodities trading firm Iitrader.com in Chicago. “All eyes are on the Fed meeting. Signs of tapering could pull down the market further.”
Syria borders Iraq and is near Iran, countries that together hold almost a fifth of the output capacity from the Organization of Petroleum Exporting Countries, Bloomberg estimates show. The Middle East accounted for 35 percent of global oil production in the first quarter of this year, according to the International Energy Agency.
The Fed will probably reduce monthly bond buying by $10 billion, to $75 billion, according to the median response of 34 economists in a Bloomberg survey on Sept. 6. That’s down from estimates of a $20 billion reduction in a July survey.
Fed Chairman Ben S. Bernanke has said he expects the Fed to complete its asset-purchase program in the middle of next year when the unemployment rate is around 7 percent, down from August’s 7.3 percent.
Libya lifted force majeure in the Zawiya and Mellitah oil ports because of “improving conditions,” state-run National Oil Corp. said on its website. The terminals were able to handle crude shipments as of noon today, the company said.
The country restored about 25 percent of its oil-production capacity with the start of the El Feel and Sharara fields yesterday, state-run news agency Lana reported, citing the head of the Libyan parliament’s oil-industry crisis group. Production from the two fields, with a combined capacity of 440,000 barrels a day, was halted by protesters on Aug. 26.
“It looks like Libya production is coming back,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “We continue to take some of the risk premium out of the market.”
Iranian President Hassan Rohani said he is ready to decommission the country’s Fordo uranium-enrichment facility in exchange for an easing of international sanctions, Der Spiegel reported yesterday, citing intelligence officials it didn’t identify.
U.S. crude stockpiles probably dropped by 1.2 million barrels last week to 358.8 million, a Bloomberg survey showed before an Energy Information Administration report tomorrow. That would be the lowest level since Aug. 31, 2012.
Implied volatility for at-the-money WTI options expiring in November was 21.9 percent, up from 21.4 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 694,424 contracts as of 4:53 p.m. It totaled 667,795 contracts yesterday, 5.7 percent above the three-month average. Open interest was 1.93 million contracts.
--With assistance from Grant Smith in London, Mariam Sami in Cairo, Saleh Sarrar and Maher Chmaytelli in Dubai and Terry Atlas in Washington. Editors: Margot Habiby, Richard Stubbe