03 September 2013 – Brent futures eased on Tuesday as worries over a military strike on Syria eased, but held above $114 per barrel as investors focused on prospects of a revival in demand growth with factory output across most of the world improving.
Better data from Europe and China and a steady recovery in the US pointed to the global economy turning a corner. According to Reuters, investors are now awaiting US jobs data due on Friday and a clearer indication from the Federal Reserve on the timing of a rollback in its monetary stimulus to gauge the outlook for oil prices.
Brent crude slipped 15 cents to $114.18 per barrel by Tuesday morning. US oil fell 98 cents to $106.68 from Friday’s settlement. Due to the Labor Day holiday, there was no Monday settlement for the benchmark.
“Oil may not move out of its current range till the employment numbers are out unless there is a sudden escalation in tensions in Syria,” Reuters quoted Newedge Japan commodity sales manager Ken Hasegawa as saying. “The market is also waiting for details on the Fed’s plan to cut back its stimulus.”
Brent may trade between $112 and $115 per barrel and the US benchmark in a $104 to $109 range till the jobs numbers are out on Friday, he said.
Factory activity in the euro zone rose at its fastest pace in over two years while China’s manufacturing sector grew in August for the first time in four months, according to business surveys published on Monday. Participants are waiting for the US Institute of Supply Management to publish its bellwether PMI for US factories later in the day.
President Barack Obama’s efforts to persuade the US Congress to back his plan to attack Syria was met with scepticism on Monday from lawmakers in his own Democratic Party who expressed concern that the US would be dragged into a new Middle East conflict.
While Obama faced obstacles at home, key US ally France said it had evidence showing that President Bashar al-Assad’s government had ordered chemical attacks.
The French government released a nine-page intelligence document that listed five points that suggested Assad’s fighters were behind the “massive and coordinated” attack on 21 August.
Yet, the lack of a broad-based support in the West may mean any attack against Assad’s government could be short and limited, and was unlikely to drag Syria’s neighbours, who are major oil exporters, into the conflict.
“Even if Obama decides on some action against Syria, it is likely to be limited,” Hasegawa said. “That means the upside potential for oil from a military strike is very limited. We may see prices spurt, but they will come back lower.”
Brent is expected to end its rebound in a resistance zone of $114.77 to $115.38, and then drop towards a support of $112.48, while US oil is expected to retest a support of $104.23, according to Reuters technical analyst Wang Tao.
*Danica Newnham, Upstreamonline