Brent below $110 as Syria tension eases

Brent oil edged down this morning, adding to steep losses in the prior session as easing worries over the Syrian crisis calmed fears that crude supply from the Middle East would be at risk.

But the modest drop suggests tensions have not completely faded after the United States, Britain and France warned Syria’s president Bashar al-Assad that there would be consequences if he failed to hand over the country’s chemical weapons.

“The risk premium is coming out of oil markets because the Syrian tension seems to be dying down,” Ben Le Brun, market analyst at OptionsXpress in Sydney.

“But they’re still simmering beneath the surface so there would still have to be some risk premium built into the price.”

Brent crude for delivery in November was down 45 cents at $109.62 a barrel by 05.05 GMT, after touching a near one-month low of $108.73 in the previous session.

The oil benchmark slid 2.4 per cent yesterday, its steepest single-day decline since June 20, after US and Russian officials reached a weekend deal to strip Syria of chemical weapons, easing worries about a US-led strike against Syria.

US crude for October delivery fell 83 cents to $105.76 a barrel, after hitting a session low of $105.59, its weakest since September 3.

Brent has lost 6.6 per cent since hitting a six-month top of $117.34 in late August when a US military strike against Syria appeared imminent.

The US benchmark has dropped almost 6 pe rcent since rising above $112 on August 28, its highest in more than two years.

Brent could ease towards $105 and US oil may fall towards $100, said Mr Le Brun, who sees further downward pressure for oil from the outcome of a US Federal Reserve policy meeting at which it is widely expected to begin withdrawing stimulus.

The Fed begins its two-day meeting later today and is expected to cut its monthly $85-billion bond purchases by at least $10 billion as it begins to close the era of cheap money that has boosted the flow of funds into commodities.

Reducing the stimulus is likely to fuel a rally in the US dollar which could dent appeal of commodities priced in the greenback, such as oil.

Reuters