Oil retreats as Syrian attack is postponed, OPEC boosts output

West Texas Intermediate dropped for a second day as the U.K. parliament rejected a motion for military action in Syria, which eased concern over an imminent attack against Assads regime. Prices were also pressured as OPEC boosted its output in August, with Saudi Arabia and UAEs production hitting a 24-year high.

On the New York Mercantile Exchange, WTI crude for October delivery traded at $107.58 per barrel at 7:26 GMT, down 1.12% on the day. Futures held in range between days high and low of $108.28 and $106.78 per barrel respectively. Light, sweet crude fell more than 2% on Thursday, trimming its weekly advance to little over 1.1%.

Meanwhile on the ICE, Brent oil for delivery in October fell by 0.53% to $114.56 per barrel at 7:26 GMT. Prices ranged between days high and low of $114.92 and $113.64 a barrel respectively. The European benchmark slipped 1.4% on Thursday and trimmed its weekly advance to 3.1% following Fridays loss.

Oil prices retreated from multi-month highs achieved earlier in the week as tension in Syria eased following the decision of the U.K. House of Commons to reject a proposal by Prime Minister David Cameron for an attack against the Syrian regime. This eased concern over an imminent military strike by an U.S.-led coalition that could spill the conflict over to the entire Middle East region, which accounts for 35% of global output. U.S. Defense Secretary Chuck Hagel said that the United States wont attack without allies.

Michael McCarthy, a chief market strategist at CMC Markets in Sydney, said for Bloomberg: “The U.K. parliament voting against action in Syria has clearly provided some relief. It appears too that there’s a lot less hot intent by the U.S. to go in without some sort of cooperation from others. There is a possibility that there will be no strike at all.”

According to a Bloomberg survey of analysts, West Texas Intermediate crude may gain next week on the possibility that a U.S. attack gets carried out. Sixteen out of 37 participants, or 43%, wagered that futures will surge through September 6, fifteen expected a drop and six projected that prices will remain flat.

Libyan output declines further

Oil prices continued to draw support as Libyas oil exports declined further and now equaled 10% of capacity as only three ports out of nine operated. According to industry sources, shipments have fallen to around 145 000 barrels per day compared to capacity of 1.25 million bpd. The country pumped out 1.6 million barrels of oil per day prior to the civil war in 2011.

However, the International Energy Agency reported yesterday that markets were well supplied and is not expected to take any action despite the recent upward price spikes. Global supplies remain ample as OPEC production climbed in August with Saudi Arabia, the groups biggest producer, achieving its highest output in 24 years.

According to data by producers and analysts, OPECs output rose by 116 000 bpd, or 0.4%, to 31.04 million bpd in August from 30.924 bpd in July. This was a sixth gain in seven months. Saudi Arabias output surged by 150 000 to 9.95 million barrels per day in August, the highest since 1989. This was a sixth consecutive gain and biggest advance between the group members.

Sarah Emerson, managing principal of ESAI Energy Inc. in Wakefield, Massachusetts, said for Bloomberg: “The amount of oil the Saudis are pumping is impressive. We could be looking at an historic bull trap. Market sentiment may turn bearish by October and November.”

The United Arab Emirates also boosted output by 120 000 barrels per day to 2.92 million, the highest since 1989 as well. That was the second-biggest production gain. Meanwhile, Libyas production pace fell by 225 000 to 575 000 barrels per day in August, a fifth straight decline.

“The Libyan issues will probably ease before long because the government will send in troops if all else fails,” Emerson said. “If they are back up at even 800,000 barrels a day in a few months, there will be a huge impact on the market.”