Brent crude oil slipped below $115 a barrel today as fears over supply disruptions in the Middle East eased after Britain said it will not join any military action against Syria.
Oil prices were still on track for the biggest monthly gain in a year, with Brent up more than 6 per cent 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 oil 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 a military attack on Syria.
Brent crude for October was down 28 cents at $114.88 a barrel by 9am, rebounding from the day’s low of $113.63. US crude for October delivery fell 90 cents to $107.90 after hitting a low of $106.75.
"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," said Eugen Weinberg, global head of commodities at Germany's Commerzbank.
He said 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,” Mr Weinberg added.
The US 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 per cent 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 more oil from Saudi Arabia and the possibility of an emergency oil stocks release by the International Energy Agency 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 International Energy Agency yesterday said 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
