WTI falls to 2 1/2-month low on signs of U.S.-Iran thaw, U.S. consumer confidence

West Texas Intermediate futures fell to the lowest since the beginning of July on speculations that relations between the U.S. and Iran are improving and as Syria fears fade. A larger than expected drop in U.S. consumer confidence also weighed on prices.

On the New York Mercantile Exchange, WTI crude for delivery in November fell by 0.49% to $103.08 a barrel at 15:04 GMT. Prices held in range between days high at $103.64 and low of $102.31, the weakest level since July 4. The American benchmark fell by 1.1% on Monday and extended its weekly decline to over 1.6% after Tuesdays retreat.

Meanwhile on the ICE, Brent futures for November settlement traded at $108.34 per barrel at 15:06 GMT, up 0.17% on the day. Prices varied between days high of $108.32 and low at $107.45 a barrel, the weakest level since August 12. The European benchmark declined by 1% on Monday and extended its weekly decline to 0.8% on Tuesday.

Oil prices continued their steep fall amid expectations for an improvement in the relations between the U.S. and Iran. All eyes are pointed at President Barack Obama and Irans recently elected centrist President Hassan Rohani as an interaction between the two at the opening of the United Nations General Assembly in New York would be considered as a positive sign.

Also negative for prices, broad expectations and signs for a peaceful diplomatic resolution to the Syria-U.S. conflict eased concern for the tension spreading to neighboring major oil producers.

Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said for Bloomberg: “The main reason for the decline in prices is the prospect that Obama and the new Iranian leader will meet today. There are also signs that progress is being made on an agreement that would remove Syria’s chemical arms. The reduction in worries about these two hot spots is putting downward pressure on the market.”

Meanwhile, data showed earlier in the day that U.S. home prices rose in July. Year-on-year, the S&P/Case-Shiller Composite-20 Home Price Index jumped 12.39% from after adding 12.07% in the preceding period, almost matching analysts expectations. At the same time, data by the U.S. Federal Housing Finance Agency showed that the U.S. House Price Index rose by 1.0% in July, surpassing analysts projections for a surge by 0.9% after advancing 0.7% in June.

However, according to a private-sector report by the Conference Board, U.S. consumer confidence fell to 79.7 in September, underperforming expectations for a slip to 80.0. Augusts reading received an upward revision to 81.8 from an initially estimated 81.5

Lynn Franco, director of economic indicators at the Conference Board, said in a statement: “Consumer confidence decreased in September as concerns about the short-term outlook for both jobs and earnings resurfaced, while expectations for future business conditions were little changed. While overall economic conditions appear to have moderately improved, consumers are uncertain that the momentum can be sustained in the months ahead.”

Oil was also pressured throughout the day amid recovering output in different OPEC members, which eased global supply concerns. Tumini Green, a spokeswoman at Nigerian National Petroleum Corp., said that production in Nigeria has increased to 2.4 million barrels per day after sabotaged lines were restarted. Output in the biggest African producer fell to 2.2 million bpd in the first quarter.

Meanwhile, Iraq boosted production from its Rumaila field after repairing a leaking pipeline, but planned works capped exports. In Libya, Sliman Qajam, the deputy head of the parliament’s energy committee, said on Sunday that the country’s output has recovered to to 600 000 barrels per day after falling to a around 150 000 bpd in the beginning of the month. South Sudan resumed pumping and exports through its pipelines which cross Sudan after a thaw in the relations between the two countries.