Crude declines on Syria weapons deal
Energy futures kicked off the week in sharp decline after western and eastern powers coalesced around Syria. The likelihood of a US strike on the Arab republic continued to fade after the United States and Russia reached an agreement to remove Syria’s chemical weapons by 2014.
The deal comes after US Secretary of State John Kerry met with Russian Foreign Minister Sergei Lavrov in Geneva during the weekend. The deal puts in motion a diplomatic response to last month’s chemical weapons attack outside Damascus. Russia spearheaded the plan after convincing the government of Bashar al-Assad to place its chemical weapons arsenal under international control. The plan also diffused momentum for a US missile strike on the Arab republic. American President Barrack Obama has kept military action on the table should Assad’s regime fail to comply with international protocol.
The deal to strip Syria of its chemical weapons diplomatically reduced the risk of disrupting Middle Eastern crude exports. Futures declined more than 1.75 percent. Brent Crude declined to four-week lows, with the November contract falling $1.96 a barrel to $109.74. Brent volumes were around 30 percent higher than the 100-day average. West Texas Intermediate, the American benchmark, fell to its lowest level in three weeks, closing at $106.15, a loss of $2.15 a barrel.
Crude prices have been buoyed by ongoing tensions in the Middle East, emanating principally from Egypt and Syria. WTI has narrowed its discount to Brent as a result of new transport infrastructure in the US. American refineries have operated at near-record levels in recent months. In July of this year WTI enjoyed its best month since August 2012 on shrinking crude inventories and higher-than-forecasted growth. US auto sales are also expected to have risen by as much as 12 percent in July, according to J.D. Power and Associates. This translates into a seasonally adjusted annualized rate of 16 million.
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