16 September 2013, News Wires – Brent oil futures fell by more than one dollar on Monday to a three-week trough below $111 per barrel as supply worries eased after the US agreed to call off military action against Syria in a deal with Russia to remove Damascus’s chemical weapons.
The crude benchmark touched a six-month high of $117.34 per barrel late in August amid worries that a possible US-led military strike against Syria may disrupt oil supplies from the Middle East, Reuters reported.
But prices dropped last week for the first time in five weeks after Russia offered to help put Syria’s chemical weapons under international control.
On Saturday, US Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov agreed to back a nine-month United Nations programme to destroy Syrian President Bashar al-Assad’s chemical arsenal.
“Tensions over Syria appear to be over and that has produced more calmness for the market,” Reuters quoted IHS Energy Insight vice-president of energy consultancy, Victor Shum, as saying.
Brent crude for delivery in November had dropped 87 cents to $110.83 per barrel by Monday morning, after falling to as low as $110.25 earlier, its weakest since 23 August.
US oil for October delivery was down 82 cents at $107.39 per barrel. It hit a session trough of $106.76.
West Texas Intermediate crude could slip below $100 as the Syrian tensions ease further, said Shum. The last time US oil traded below $100 was in early July.
The decline in oil prices came despite the weakness in the dollar which typically makes dollar-denominated assets cheaper for holders of other currencies.
The dollar fell to a near four-week low against a basket of major currencies as investors bet the Federal Reserve will keep monetary policy loose for longer after Lawrence Summers pulled out from the race to be the next Fed chief.
Summers, a former top aide to President Barack Obama and Treasury secretary under President Bill Clinton, withdrew from consideration to succeed Federal Reserve Chairman Ben Bernanke, after liberal pressure soured his confirmation prospects.
The Federal Open Market Committee is meeting for two days from Tuesday with expectations high that policymakers will decide to reduce the monthly $85-billion bond purchases as they begin to end the era of cheap money that has boosted fund flow into commodities.
A reduction in the US economic stimulus could put more downward pressure on oil prices, said Shum, given the liquidity that will be removed from markets.