Last update: 11-Dec-2013 5:04 pm
Wednesday, December 11, 2013
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Oil reverses decline on Syria easing
Benchmark Brent crude oil prices eked out a small gain yesterday, reversing a deep early slide amid upbeat economic data, North Sea output woes and a new French report on Syria’s use of chemical weapons. Oil had fallen by more than US$2 a barrel in opening trade after US President Barack Obama said at the weekend that he will seek congressional authorisation for punitive military action against Syria, almost certainly pushing back any air strikes until Washington’s summer recess ends on September 9. But the market’s mood turned more bullish throughout the day, with traders buoyed by improved factory activity in China and the euro zone, news of delays to benchmark North Sea Forties oil production and a French intelligence report that may bolster the case for military action to punish Syrian President Bashar al-Assad for a reported chemical weapons attack on August. 21.
Brent futures rebounded from a US$2 drop early in the day to rise 35 cents or 0.3 per cent to settle at US$114.36 a barrel. The US benchmark fell 83 cents to trade last at US$106.82 per barrel at 1pm EST, the end of a thinly traded, holiday-shortened day. It had dropped as low as $104.21. Due to the Labor Day holiday, the US market will not issue a settlement price for yesterday’s activity. Brent rose nearly 3 per cent last week, its biggest weekly gain since July, on worries a strike against Syria would disrupt Middle East oil exports at a time when markets are already coping with the loss of supplies from Libya and Sudan. While Obama’s decision to seek congressional approval on Syria cooled pre-weekend speculation of an imminent attack, a nine-page report drawn up by France’s military and foreign intelligence services—and released to lawmakers on Monday—listed five points that suggested Assad’s fighters were behind the assault, a government source told Reuters.
“The Syrian crisis has not gone away,” said David Hufton, managing director of London brokerage PVM Oil Associates. “There is only so much uncertainty that markets can take before they go into full scale safe-haven lockdown. With the Middle East in such turmoil, we would argue that oil will be regarded as the commodity safe haven.” While hedge funds ramped up bets on the possibility of future supply disruptions in the Middle East, immediate outages lent further support to prices, analysts said. Four cargoes of North Sea Forties crude oil—the largest of the four grades that make up the Brent benchmark—have been delayed into October from September due to lower-than-expected production, trade sources said on Monday. Tightening European markets helped push the October Brent premium to US WTI crude up by more than US$1 to US$7.55 a barrel, its widest since June. A report by Deutsche Bank on Monday estimated more than 2.7 million barrels per day of oil supply had been lost to the market through civil war, unrest, sanctions and disruption to production in half a dozen countries from Libya to Britain.
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