A possible scenario from the development of events is Russia demanding President Assad hand over chemical weapons, meaning there wouldn’t be any strikes against Syria. This was reflected in crude retreating further from its high.
Crude rallied on the back of better-than-expected Chinese and US economies, possible disruptions from retaliation from Syria and speculation that supply inventories are at a low. The data from EIA showed supplies slipped as refineries had to meet gasoline demand during the summer.
The lacklustre NFP number indicated the US economy might not be ready for a meaningful tapering and a chance the Fed might delay this. Output from Libya, previously shut due to protests, has been restored with production increasing to 600,000 barrels a day. All export terminals will be open next week according to Sliman Qajam, a member of the Libyan parliament energy committee.
All these have capped the upside on Oil - Brent Crude and WTI, with both consolidating most of last week and this week while these problems are resolved. Why is crude still trading above $100 when the issues that propelled it to the high are diminishing? The answer may lie in the fall in production and supply. We will look into countries such as Libya, Iran and Iraq in their efforts to boost crude production.
The prolonged strikes in Libya have disrupted supply from its peak of over 3 million barrels in the 1970s. Production in Libya has been on a steep decline since September 2012. If the government can resolve issues with protesters and gangs targeting production, the country can push production up, although reaching the peak of over 3 million barrels a day might be difficult at this point.