Oil futures tumbled Monday after the U.S. and Russia
over the weekend agreed to the framework of a deal for Syria to turn over its
chemical weapons to international authorities, easing concerns of a potential
strike against the country and supply disruptions in the Middle East.
Light, sweet crude for October delivery fell $1.33, or 1.2%, to $106.96 a
barrel on the New York Mercantile Exchange. Brent crude on ICE Futures Europe
declined $1.65, or 1.5%, to $109.99, a barrel, earlier dropping to its lowest
level since Aug. 20, the day before
Syria
allegedly launched a chemical attack that killed more than 1,400 civilians.
Fears the
U.S.
and its allies would respond with a military intervention had boosted crude
prices in recent weeks, as investors worried that such an action could
interfere with the flow of crude through major pipelines and sea routes in the
Middle East
, which produces
roughly a third of the world's oil.
Diplomatic progress though, has stalled that momentum and eliminated much of
the so-called risk premium that had built up in the oil market.
"There's a real slim chance of any potential U.S.-led strike in the near
term, and overall it looks the [Middle Eastern] region is relatively safe for
now and we'll see more oil market in the market," said John Kilduff,
founding partner of Again Capital in New York.
Under terms of the agreement struck by the
U.S.
and
Russia
on Saturday, Syrian President Bashar al-Assad must fully declare his
chemical-weapons stockpiles to the Organization for the Prohibition of Chemical
Weapons by Friday.
The
U.S.
and its European allies on Monday were pushing for a United Nations
resolution on
Syria
that would force the country to dismantle its chemical-weapons arsenal without
alienating
Russia
,
Syria
's chief backer.
While
Syria
has taken center stage, turmoil elsewhere in the
Middle East
has weighed on crude
supplies in recent weeks. Strikes at
Libya
's
oil export terminals have led to a 40% reduction in the country's crude output
last month, according to data from the Energy Information Administration.
Meanwhile, traders say oil prices were helped somewhat by the news Lawrence
Summers withdrew his name from consideration to become the next chairman of the
Federal Reserve. Investors believe Mr. Summers was likely to be more aggressive
in reducing the central bank's $85-billion-a-month bond-buying program than
other top candidates such as Janet Yellen, the Fed's current vice chairwoman.
The economic stimulus program has helped crude prices by weakening the dollar,
making oil cheaper to buy using other currencies.
Market participants are awaiting some details on the Fed's plans to scale back
its so-called easy-money program from the central bank's policy meeting on
Tuesday and Wednesday.
Front-month October reformulated gasoline blendstock, or RBOB, recently fell
4.64 cents, or 1.7%, to $2.7230 a gallon. October heating oil declined 3.25
cents, or 1%, to $3.0818 a gallon.