Oil edges lower as UK lawmakers reject Syria attack

Oil prices01 September 2013, News Wires – Brent crude oil fell on Friday in choppy trading as fears of Middle East supply disruption receded after Britain said it would not join any military action against Syria.

Oil prices were still on track for their biggest monthly gain in a year, with Brent up more than 6 percent in August, after unrest cut output in Libya by around 1 million barrels per day (bpd) and production fell in Iraq, Nigeria and elsewhere.

Upward momentum for 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 an attack on Syria. The decision was a setback for U.S.-led efforts to respond to Damascus over the alleged use of chemical weapons against civilians, although U.S. officials suggested President Barack Obama would be willing to proceed with limited actions against Syria even without specific promises of allied support.

Oil prices briefly rose on news that U.S. Secretary of State John Kerry is expected to make a statement about Syria, a U.S. government source said.

“I think the U.S. has been fairly resolute in what they’ve been saying, so I guess Kerry’s going to map it out this morning,” said Andy Lebow, vice president at Jefferies Bache in New York. It’s definitely a loose market that’s just headline-focused right now.”

Brent crude for October fell 21 cents at $114.95 a barrel by 10:59 a.m. EDT (1500 GMT), after earlier reaching as low as $113.63. U.S. crude for October delivery fell 70 cents to $108.10, after hitting a low of $106.75.

“The pendulum is now swinging back in the direction of declining risks,” said Eugen Weinberg, global head of commodities at Germany’s Commerzbank.

“The market priced in too much of a risk premium, so prices are coming down,” he said.

The U.S. 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 percent 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.

Increased production by Saudi Arabia and the possibility of an emergency oil stocks release by the International Energy Agency (IEA) could offset the disruption.

Supply from the Organization of the Petroleum Exporting Countries has averaged 30.32 million barrels per day (bpd), down from a revised 30.50 million bpd in July, a Reuters survey of shipping data and sources at oil companies, OPEC and consultants found.

The U.S. Energy Information Administration said on Thursday oil markets were well supplied, 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.

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