Oil swings as Libyan output recovers, China manufacturing data, easing Syria tension

Oil prices swung between gains and losses on Monday after both WTI and Brent benchmarks settled lower last week. Market players weighed easing tension between Syria and the U.S. and recovering Libyan output against upbeat China manufacturing data and expectations for an expansion of the European and U.S. manufacturing sectors.

On the New York Mercantile Exchange, WTI crude for delivery in November fell by 0.03% to $104.72 per barrel at 7:01 GMT. Prices held in a narrow range between days high of $104.84 and a one-month low of $104.44 a barrel. Light, sweet crude fell 0.3% on Friday and settled the week 3.4% lower after retreating 1.56% in the preceding five-day period.

Meanwhile on the ICE, Brent futures for November settlement traded at $109.29 a barrel at 7:01 GMT, up 0.06% on the day. Prices shifted in a days range between $109.32 and $108.96 a barrel. The European benchmark rose by 0.4% on Friday but settled the week 2.2% lower, the biggest weekly decline in three months.

Recent losses were capped as upbeat manufacturing data from China boosted market players confidence that the Asian nations economy will pick up in the second half of the year. The September reading of the HSBC Flash China Manufacturing PMI rose to a six-month high of 51.2 and surpassed analysts expectations for a surge to 50.9 after hitting 50.1 in August. At the same time, the Flash China Manufacturing Output Index jumped to a five-month high of 51.1 from 50.9 in August.

Hongbin Qu, Chief Economist, China & CoHead of Asian Economic Research at HSBC commented: “The HSBC Flash China Manufacturing PMI rose to a six-month high in September, adding further evidence to China’s ongoing growth rebound. The firmer footing was supported by simultaneous improvements of external and domestic demand conditions. We expect a more sustained recovery as the further filtering-through of fine-tuning measures should lift domestic demand. This will create more favourable conditions to push forward reforms, which should in turn boost mid- and long-term growth outlooks.”

Data today may also show that the Euro zones Advance Manufacturing PMI has risen to 51.7 in September from 51.4 in the preceding month, a third consecutive monthly advance. Meanwhile, the Markit Flash U.S. Manufacturing PMI is expected to have risen to 54.0 in September from 53.1 in August.

Michael McCarthy, a chief market strategist at CMC Markets in Sydney, said for Bloomberg: “Oil markets might be soft in the short term as the Syria situation heads toward some resolution. The manufacturing data “will set the tone for oil markets this week.”

Syria dispute

The oil market remained pressured as diplomatic progress between Syria and the West eased concern that a military intervention in the Syrian civil war might spread the conflict over to neighboring major oil producers in the Middle East. Assads regime submitted an initial inventory report of its chemical arsenal on September 20, meeting a deadline that was set by the U.S.-Russia agreement that aimed for avoiding military action.

Discussions on the plan to destroy Syrias chemical weaponry will continue this week in the U.N. with the first conflict between the negotiators already at hand. The Western partners, the U.S., U.K and France, want to drive through a resolution that provides enforcement of the terms in the September 14 Geneva accord, something which the Russian side opposed. Russian Foreign Minister Sergei Lavrov said that the U.S.-European plan to include threats of force in the resolution is “irresponsible and unprofessional”.

Also pressuring prices, Libyas oil output continued to recover, easing supply concerns. Sliman Qajam, the deputy head of the Libyan parliament’s energy committee, said yesterday that all fields in the west of the country are producing and production has picked up to 600 000 barrels per day after falling to a around 150 000 bpd in the beginning of the month, less than a tenth of its pre-civil war capacity in 2011.

At the same time, South Sudan has increased its production to the highest pace since the country resumed its exports through the pipelines crossing Sudan. A positive diplomatic tone between Iran and the U.S. could also weigh on prices. Recently elected President Hassan Rouhani is expected to meet this week with President Barack Obama in New York for further talks on the countrys disputed nuclear program, which put Iran under Western sanctions that curbed the countrys oil exports.