LM:Brent tops $112 after steep fall on easing Syria tension
London: Brent crude rose above $112 a barrel on Wednesday, after falling more than 4% in the past two days as concerns eased regarding an imminent strike against Syria.
US President Barack Obama vowed on Tuesday to explore an initiative from Russia to neutralise Syria’s chemical weapons, but he voiced scepticism about it and still sought support for his threat to use military force should diplomacy fail.
Prices could spike if any move against Syria spills over into violence in the Middle East’s main oil producing countries.
Brent crude was trading $1.10 higher at $112.35 a barrel by 0924 GMT, after dropping to a two-week low of $110.59 and closing down $2.47 on Tuesday. US crude was up 37 cents at $107.76 a barrel.
The prospect of an imminent attack on Syria added a risk premium of about $5 that pushed Brent above $117 last month, but the market has almost returned to levels from before then.
“All has not been solved and not set, with uncertainties lingering,” said Ken Hasegawa, a commodity sales manager at Newedge Japan. But “Syria’s problem has eased, with market’s attention returning to the US financial policies.”
Many analysts say the US Federal Reserve will decide next week to begin tapering its monetary stimulus, although last Friday’s disappointing US jobs data convinced many economists that any withdrawal will probably be gradual.
Any cut in the Fed’s stimulus would likely strengthen the dollar, which would hit oil and other commodities priced in the greenback.
US crude stocks fell by 2.9 million barrels last week, compared with analyst expectations for a decrease of 1.5 million barrels, American Petroleum Institute data showed on Tuesday.
Gasoline stocks rose by 195,000 barrels, compared with expectations in a Reuters poll of a 1.3 million barrel decline.
Investors await Wednesday’s report from the US Energy Information Administration (EIA) to be released at 10:30 am EDT (1430 GMT).
Syria
President Obama asked leaders in Congress to put off a vote on his request to authorise the use of military force to let diplomacy play out. He said US Navy ships in the eastern Mediterranean and other forces in the region are in place and ready to respond should diplomacy fail.
He set no deadlines for diplomacy to run its course but said the United States will work with Russia and China to put forward a resolution at the UN Security Council requiring Syrian President Bashar al-Assad to give up his supplies of sarin, mustard gas and VX nerve agents.
