WTI extends losses as Obama postpones vote for attack on Syria

West Texas intermediate dropped for a third day as President Obama called for a pause on authorizing military action against Syria after yesterday the Middle Eastern country agreed with the Russian proposal to relinquish control of its chemical arsenal. This eased concern over an imminent escalation of the conflict, which investors feared might spill over to neighboring major oil producers and curb global supply. EIAs weekly crude oil inventories report fell in focus.

On the New York Mercantile Exchange, WTI crude for delivery in October slipped to $107.06 per barrel at 7:00 GMT, down 0.30% on the day. Prices held in range between days high and low of $107.38 and $106.58 per barrel respectively. The contract fell 1.2% yesterday, extending its weekly decline to over 2.8%.

Meanwhile on the ICE, Brent oil for October settlement rose to a new session high of $111.85 per barrel at 7:06 GMT, up 0.54% on the day. Days low was touched at $111.03 per barrel in Asian trading. The European benchmark plunged 1.5% on Tuesday but trimmed its weekly decline to 3.6% following Wednesdays advance.

Oil prices made a significant retreat this week as the different sides in the Syrian conflict made important progress to reaching a peaceful resolve. On Tuesday, Foreign Minister Walid al-Muallem said during a trip to Moscow that Syria accepted Russia’s proposal for granting international control to its chemical weapons as a way for peacefully resolving the conflict with the U.S. and averting military intervention.

“Yesterday we had a round of very fruitful negotiations with Foreign Minister Sergei Lavrov and he proposed an initiative concerning chemical weapons,” al-Muallem said. “And already by the evening we agreed to the Russian initiative.”

Later in the evening, President Barack Obama asked Congress in a televised address to the nation to delay voting in favor or against authorization of military action against Syria in order, seeking a diplomatic resolution to the problem after the Middle Eastern country agreed to put its chemical weapons under international control.

David Lennox, a resource analyst at Fat Prophets in Sydney, said for Bloomberg: “It’s all about President Obama’s speech. That’s removed some of that uncertainty surrounding a U.S. strike and what the retaliation might be. The market will remain volatile once it gets over the news that there’s not going to be an attack tomorrow, but it’s still potentially there.”

Inventories data

Meanwhile, losses remained in check after the industry-funded American Petroleum Institute reported a drop in crude reserves last week. Crude stockpiles fell by 2.93 million barrels, the institute said, while gasoline inventories rose by 195 000 barrels. Distillate fuel supplies increased by 807 000 barrels. APIs data however is considered as less reliable than EIAs statistics as it is based on voluntary information from operators of refineries, pipelines and bulk terminals.

The Energy Information Administration will publish its weekly crude oil inventories report at 14:30 GMT on Wednesday. According to a Bloomberg survey of analysts, the report might show crude reserves fell by 2.1 million barrels last week, while gasoline stockpiles should have decreased by 1 million barrels. Distillate fuel inventories are expected to have increased by 600 000 barrels.

Also supportive for oil, the EIA raised its 2013 world oil demand growth forecast by 20 000 barrels per day to 1.1 million bpd. The agency cut its 2014 growth projection by 30 000 bpd to 1.10 million in its monthly forecast.

China data

The oil market continued to be underpinned by upbeat China economic data from the past few days. The Asian country’s industrial output rose more than expected. China’s industrial production surged by 10.4% in August, exceeding analysts’ projection for a 9.9% rise and the preceding month’s 9.7% expansion. Meanwhile, the Chinese National Bureau of Statistics reported that Chinese Retail Sales surpassed both economists’ expectations and the previous month’s increase of 13.2% and increased by 13.4%.

Data showed on Monday the country’s total exports rose by 7.2% last month, exceeding analysts’ expectations for a 5.5% surge. Imports increased by 7%, below projections, but still above July’s 5.1% rise. China’s trade surplus widened to $28.6 billion from $17.8 billion in July, surpassing expectations for a rise to $20.0 billion.

Meanwhile, the Chinese National Bureau of Statistics reported that consumer inflation rose by 2.6% and remained below the government’s target, leaving extra room for mini financial stimulus, which could provide ground for sustainable growth. China’s producer-price index fell by 1.6% in August after dropping 2.3% in July, marking the smallest decline in six months.