The price of oil fell below $107 a barrel today as the likelihood of an imminent U.S. attack against Syria diminished.
By early afternoon in Europe, benchmark crude for October delivery was down 82 cents to $106.83 a barrel in electronic trading on the New York Mercantile Exchange. On Friday, the contract fell $1.15 to close at $107.65.
Trading volumes were limited today as floor trading on the Nymex was closed because of Labor Day. As a result, the benchmark contract was volatile, swinging within a wide range of more than $3, between $104.21 and $107.31.
President Obama has had difficulty convincing the world about the need to take action against Syria’s government in response to an alleged chemical attack last month that the U.S. says killed at least 1,429 civilians. That number is significantly higher than the death toll of 355 provided by the aid group Doctors Without Borders.
Only France is firmly on board among the major military powers, after Britain’s Parliament rejected the use of force in a vote last week. Both Russia and China strongly oppose unilateral U.S. military action.
While Syria is not a major oil producer, it straddles a region that is. The possibility of a wider conflict, one that could interrupt production and shipping routes in the region, has pushed oil prices higher in recent days.
“Even though the saber-rattling over a military strike against Syria is continuing and a U.S. attack remains a realistic option, the debate has become considerably less heated,” said a report from analysts at Commerzbank in Frankfurt. “This is likely to weigh on oil prices given that many market players have been betting on climbing oil prices in anticipation of military action in Syria and a possible spill-over of the conflict in the most oil-rich region of the world.”
Oil prices recovered from daily lows thanks to two surveys showing that China’s manufacturing improved in July. The world’s second-largest economy is trying to reverse a slowdown that pulled economic growth to a two-decade low of 7.5 percent in the latest quarter.
“The Chinese manufacturing data increased hopes for a stronger oil demand from China in the second half of 2013,” said analysts at Sucden Financial Research in London.
Brent crude, the benchmark for international crudes, was down 19 cents to $113.94 a barrel on the ICE Futures exchange in London.
In other energy futures trading on Nymex:
— Wholesale gasoline was down 6.02 cents to $2.8704 per gallon.
— Heating oil lost 4.78 cents to $3.1405 per gallon.
— Natural gas rose 2.3 cents to $3.641 per 1,000 cubic feet.