Crude oil futures for October closed down 1.1% in the main session in New York, and continued to slide in electronic extended trading, falling to $104.75 by 7.45pm (London time). The decline in the price of oil follows the US and Russia agreeing a diplomatic deal over the weekend that makes military action by the US now seem unlikely.
While the situation is not fully resolved, and the UN Security Council is still hammering out a resolution based on a draft put forward by the UK, US and France, market participants are no longer worried that the Syria situation poses an imminent threat to Middle Eastern oil supplies. Consequently, the risk premium that was priced into the oil market as the threat of a US strike escalated is now ebbing.
The price of oil was also being pressured by news that Libya had opened two further ports for oil transportation. Force Majeure restrictions have been lifted at the ports of Zawiya and Mellitah, with oil exports beginning today. This follows news yesterday that production had resumed at the El Feel and Sharara oil fields, which should restore up to a quarter of the country’s oil output. The oil fields had been shut by protestors since 26 August.