Crude Oil and Brent Oil Ease As Traders Book Profits

Crude oil tumbled over $1.13 to trade at 108.39 this morning while Brent oil gave up 33 points to touch 112.79 as the spread closed to just over $4.40 against an average of $6.00. Oil prices dipped in Asian trade Tuesday as fears of a possible US-led strike on Syria eased, with the United States appearing open to a Russia plan for Damascus to give up its chemical weapons. President Putin introduced a possible solution to President Assad and urged the Syrian leader to accept the surrender of its chemical weapons to UN control to be destroyed at a later time. Assad seemed to accept this alternative. President Obama also agreed to the Russian proposal saying that it was a positive step but he wanted to see the actual proposal.

Buying of oil and safe-haven flows eased as President Barack Obama met resistance in the U.S. Congress to his call for U.S. military action in Syria. Investors grew less worried about the risk of further oil supply disruption in the Middle East. Brent crude oil prices sank over 2 percent and U.S. crude futures settled 0.91 percent lower. U.S. Secretary of State John Kerry suggested Damascus could avert U.S. strikes by handing over chemical weapons. Russia seized on his remarks and made a similar suggestion. Latest poll results released Monday by CNN showed that the majority of Americans opposed military actions against Syria, even if the Congress should authorize the plan.

Data over the week showed that China’s exports rose 7.2 percent year on year to 190.61 billion U.S. dollars in August, up 2.1 percentage points from the increase in July, according to Chinese customs figures released on Sunday. The latest figure also exceeded market expectations. Positive data helped limit the decline of prices as traders sold off the commodity to book profits ahead of next week’s FOMC meeting where most traders are expecting the Fed to begin to taper its monthly asset purchases.

Gasoline fell 2.1 cents to $3.587 a gallon in the week ended Monday, the Energy Information Administration said. The drop follows increases in the prior two weeks that lifted gasoline prices by 5.8 cents. Prices are down 6.8%, or 26 cents, from a year earlier, the biggest year-on-year decline since April 29. The decline comes as the peak-demand summer driving season for gasoline comes to an end. Reformulated gasoline blend-stock futures prices on the New York Mercantile Exchange dropped Monday to the lowest since July 2. Current gasoline prices are 12.8% below the record national average of $4.114 a gallon reached July 7, 2008, the EIA data show.

In its August Short-Term Energy Outlook, the EIA projected gasoline prices will average $3.53 a gallon this month, down from the record September price of $3.85 a gallon set a year earlier Prices so far this month are averaging $3.598 a gallon. The forecast is based on Nymex crude-oil futures averaging $100 a barrel, a five-year high for the month, and up from $94.51 a year earlier. Nymex crude is averaging $108.84 a barrel so far this month.

Natural gas gained on Monday as demand for the cheaper energy product seems to be gaining favor after the EIA revised the long term forecast for oil prices much higher. The cost of refitting trucks and energy plants to natural gas is significant but the high price of crude oil is helping to push many commercial users to make the move. Warmer weather across the US is also helping support prices as summer comes to an end. Natural gas is trading at 3.614 flat this morning.