Oil falls to $115 as UK rejects Syria intervention
London, August 30, 2013
Brent crude oil slipped to $115 a barrel on Friday as fears over supply disruptions in the Middle East eased after Britain said it would not join any military action against Syria.
Oil prices were still on track for their biggest monthly gain in a year, with Brent up more than 6 percent in August, after unrest cut output in Libya by around 1 million barrels per day (bpd) and production fell in Iraq, Nigeria and elsewhere.
But upward momentum for prices appeared to have stalled after Britain's parliament defeated a proposal by Prime Minister David Cameron that could have led to UK involvement in an attack on Syria.
The decision was a setback for U.S.-led efforts to punish Damascus over the use of chemical weapons against civilians, although U.S. officials suggested President Barack Obama would be willing to proceed with limited actions against Syria even without specific promises of allied support.
Brent crude for October was down 15 cents at $115.01 a barrel by 1000 GMT, after earlier reaching as low as $113.63. U.S. crude for October delivery fell 80 cents to $108.00, after hitting a low of $106.75.
"The pendulum is now swinging back in the direction of declining risks," said Eugen Weinberg, global head of commodities at Germany's Commerzbank.
"The market priced in too much of a risk premium, so prices are coming down, and I think they will go down even lower from here," he said, adding that predictions by some investment banks that oil prices could rise much further were ill-judged.
"Talk of oil at $150 is just raising fear unjustifiably. It is scaremongering," he said.
The U.S. Energy Information Administration said this month global supply disruptions reached 2.7 million bpd in July, with analysts saying outages have risen since then.
Libya's crude exports have shrunk to just over 10 percent of capacity from three ports, out of a possible nine, as armed groups have tightened their grip on its major industry. Maintenance in Iraq in September is also expected to cut supplies.
"Brent will be supported mainly due to supply disruption," said Yusuke Seta, a commodity sales manager at Newedge Japan, although increased production by Saudi Arabia and the possibility of an emergency oil stocks release by the International Energy Agency (IEA) capped price gains.
Saudi Arabia, the world's largest oil exporter, is set to pump a record 10.5 million bpd of crude in the third quarter to help balance the market, U.S. energy consultancy PIRA said.
The U.S. Energy Information Administration said on Thursday oil markets were well supplied and did not warrant any action by the West's energy watchdog, despite a recent spike in prices.
The EIA also released a report saying global spare oil production capacity, excluding Iran, in July and August was slightly higher than during the same period last year.-Reuters
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