MW: Oil falls below $106 on easing Mideast tensions
By Myra P. Saefong and Michael Kitchen, MarketWatch
SAN FRANCISCO (MarketWatch) — Oil futures headed lower on Tuesday for a third consecutive session, falling below $106 a barrel on further signs of easing tensions in the Middle East.
Oil traders looked ahead to this week’s data on U.S. petroleum supplies, which will be released late Tuesday and early Wednesday, as well as the Federal Reserve’s decision on monetary policy due Wednesday afternoon.
Crude oil for October delivery CLV3 -0.93% slipped 75 cents, or 0.7%, to $105.84 a barrel on the New York Mercantile Exchange. Prices, which fell 1.5% on Monday after losing 0.4% on Friday, were poised for their lowest close since late August.
Declines this week follow news over the weekend that the U.S. and Russia reached a deal to get Syria to surrender its chemical weapons to avoid a U.S. military strike.
“Crude-oil prices continue to fall, as the two-pronged issue of real and imagined supply threats recede,” analysts at the Kilduff Report said Tuesday. “The imagined is Syria, and that situation is in full diplomatic attenuation for now.”
The United Nations did declare “with finality that sarin gas was used, but the U.S. and Russia are still battling over who did it,” they said. “The main point is that now a long-drawn-out march to a showdown over surrendering the chemical weapons will play out.”
On ICE Futures, November Brent crude UK:LCOX3 -1.70% fell $1.18, or 1.1%, to $108.89 after it lost 1.5% Monday.
“Brent is in a good spot to remain under pressure now,” said Keith McCullough, chief executive officer at Hedgeye Risk Management, in an emailed note. “Don’t forget that only two weeks ago, we saw the highest net long (futures/options contracts) position ever in crude.” A long position is essentially a bet that prices will rise.
Citi Futures analyst Timothy Evans also cited news that Iran had signaled it wants to return to the negotiating table over its nuclear program as part of the reason for the decline in oil prices.
In terms of Iran, “chances for a breakthrough in relations seem remote, but diplomacy does seem to be in the air,” he wrote in a daily report.
U.S. supplies and the Fed
Investors were awaiting the latest weekly numbers on U.S. crude supplies, due from the American Petroleum Institute on Tuesday at 4:30 p.m. Eastern time.
A Platts survey of analysts showed average expectations for a 1.5-million-barrel fall in crude-oil stocks for the week ended Sept. 13, with oil imports also declining.
The survey also showed that analysts expect gasoline stockpiles to be unchanged for the week and distillate inventories, which include heating oil, to climb by 1 million barrels.
On Nymex Tuesday, October gasoline RBV3 -1.63% fell 2 cents, or 0.9%, to $2.69 a gallon, while October heating oil HOV3 -1.98% shed 3 cents, or 1.1%, to $3.03 a gallon.
Following the API numbers, the more closely watched inventory figures from the U.S. Energy Information Administration were slated for release Wednesday at 10:30 a.m. Eastern time.
Also on the docket is the U.S. Federal Reserve’s policy decision on Wednesday afternoon. Most market participants expect the central bank to cut its $85 billion in monthly bond purchases by $10 billion to $15 billion. The monetary stimulus has been seen as a positive influence on energy demand.
Economic data Tuesday showed that the U.S. consumer price index rose by a seasonally adjusted 0.1% last month, matching the forecasts of MarketWatch-polled economists, while confidence among home builders in September remained at the highest level in almost eight years.
Rounding out action on Nymex, October natural gas NGV13 -0.03% was up almost 2 cents, or 0.4%, at $3.75 per million British thermal units, following a 1.7% rise the previous day.
Myra Saefong is a MarketWatch reporter based in San Francisco. Follow her on Twitter @MktwSaefong.
Michael Kitchen is Asia editor for MarketWatch and is based in Los Angeles. You can follow him on Twitter at @KitchenNews. Polya Lesova in New York contributed to this report.
