WTI & Brent Crude Oil Ease After Tuesdays Rapid Climb

Crude oil climbed yesterday after President Obama got additional support for military intervention into Syria. Crude oil traded as high as 108.80 and closed at 108.54 while Brent crude traded in the 115 level adding 4 cents to trade at 115.75 on Wednesday morning. Crude prices rose on Tuesday as fears of an imminent attack on Syria pushed prices higher. President Barack Obama won support from two key Republicans for a limited military strike on Syria to punish President Bashar al-Assad for his suspected use of chemical weapons against civilians. Israel tested its missile system on Tuesday in East Mediterranean that led to panic in the market amidst fears of an attack on Syria. Libya’s oil supplies slipped to the lows seen during the 2011 civil war. The virtual shutdown of Libya’s oil industry has squeezed supply as tightly as when the International Energy Agency (IEA) ordered a rare release of strategic oil reserves during the civil war in 2011.

Traders can expect crude prices to go up as tensions in Middle East are likely to worsen supply concerns and push prices higher. Traders will closely monitor this week’s EIA inventory. The US Department of Energy report might show a nearly 2 million barrel fall in crude oil inventory for the week ended 30th August. Gasoline inventories probably declined by 400,000 barrels whereas Distillate stocks are expected to increase by 1 million barrel, according to a Bloomberg survey.  Gasoline might drop as driving season, which ended with the Labor Day on September 2nd might lead to a higher than the aforementioned use of gasoline. A survey from the AAA and IHS predicted that 34.1 million people in the country would take a trip of 50 miles or more, 4.2% higher compared to the same data last year and its highest levels since 2008. The privately-funded API is expected to release its stockpiles report later tonight. Both the API and DoE inventory releases have been postponed a day due the Labor Day holiday on Monday.

Brent oil futures saw an increase in backwardation due to immediate supply threats. The Brent’s active and near-month contract backwardation widened to almost $2 per barrel from near $1 barrel in the last fortnight. A similar impact was not witnessed in the WTI till now.

Saudi Arabia, the world’s top oil exporter, raised the price of its Arab Light crude in October to customers in Asia and the United States, while cutting prices to Europe and the Mediterranean, state oil company Saudi Aramco said yesterday.

Natural gas climbed to 3.672 up by 3 pips in the Asian session. A stronger US dollar continues to weigh on the commodity. Natural gas prices rose on Tuesday as warm weather boosted the cooling demand for gas. Prices can continue to move in range to higher on back of continued warm weather. Front-month gas futures on the New York Mercantile Exchange rose 8.5 cents, or 2.37 percent, to settle at $3.666 per million British thermal units. Gross natural gas production in the lower 48 U.S. states climbed 0.1 percent in June from upwardly revised May output, data from the U.S. Energy Information Administration reported.