MARKET WATCH: Oil prices drop on news Syria will give up chemical weapons

Crude oil prices fell sharply on news that the likelihood of a US military attack on Syria appeared to be lessening after Russia’s proposal that the Syrian government give up its chemical weapons.

Oil prices have been waffling since late August following the fatal use of chemical weapons on citizens in Syria, and the US government has blamed the Syrian government for the attack.

Previously, US Sec. of State John Kerry suggested Syrian President Bashar al-Assad could avert an air strike on Syria by submitting chemical weapons to the international community to be destroyed.

The Russian government reportedly talked with officials in Damascus, and Syria’s foreign minister has said Syria is prepared to accept Russia’s proposal to take control of the country’s chemical weapons.

US President Barack Obama called the news from Syria “a potentially positive development.”

Separately, the US Energy Information Administration issued a brief examining crude oil production in Syria and world oil supply.

“Before the civil war began in 2011, Syria produced around 400,000 b/d of crude oil and exported about 150,000 b/d, mostly to Europe. However, ongoing hostilities, which have significantly affected energy infrastructure, combined with stringent international sanctions on petroleum exports from Syria, cut crude oil production by about 85%,” the EIA brief “Today in Energy” said.

Although the allegedly recent use of chemical weapons in Syria has helped pushed Brent oil prices higher on concerns about wider geopolitical unrest, these events have not reduced the physical flow of crude oil into the world market, EIA said.

Energy prices

The October contract for benchmark US light, sweet crudes on the New York Mercantile Exchange fell $1.01 on Sept. 9, settling at $109.52/bbl. The November crude contract dropped by $1.05 to $108.47/bbl.

Heating oil for October delivery was down 4.5¢ to settle at a rounded $3.12/gal on NYMEX. Reformulated gasoline stock for oxygenate blending for October declined 5.1¢ to a rounded $2.80/gal.

The October natural gas contract rose 7.5¢ to close at a rounded $3.61/MMbtu on NYMEX. On the US spot market, the gas price at Henry Hub, La. was $3.59/MMbtu, a 4.5¢ climb from the Sept. 6 closing.

In London, the October IPE contract for North Sea Brent crude dropped $2.40 to $113.72/bbl. The September contract for gas oil settled at $960/tonne, down $11 from the previous session.

The Organization of Petroleum Exporting Countries reported its basket of 12 benchmark crudes was down 71¢, closing at $111.39/bbl on Sept. 9.

Contact Paula Dittrick at paulad@ogjonline.com.

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