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Oil falls to $115 as UK rejects Syria attack

Oil prices were still on track for their biggest monthly gain in a year, with Brent up more than six per cent in August, after unrest cut output in Libya by around one million barrels per day and production fell in Iraq, Nigeria and elsewhere.

But upward momentum for prices appeared to have stalled after Britain’s parliament defeated a proposal by Prime Minister David Cameron that could have led to UK involvement in an attack on Syria.

The decision was a setback for US-led efforts to punish Damascus over the use of chemical weapons against civilians, although US officials suggested President Barack Obama would be willing to proceed with limited actions against Syria even without specific promises of allied support.

Brent crude for October was down 30¢ at $114.84 a barrel in mid-afternoon trading, after earlier reaching as low as $113.63. US crude for October delivery fell 60¢ to $108.20, after hitting a low of $106.75.

“The pendulum is now swinging back in the direction of declining risks,” said Eugen Weinberg, global head of commodities at Germany’s Commerzbank. “The market priced in too much of a risk premium, so prices are coming down, and I think they will go down even lower from here,” he said, adding that predictions by some investment banks that oil prices could rise much further were ill-judged.

“Talk of oil at $150 is just raising fear unjustifiably. It is scaremongering,” he said.

The US Energy Information Administration said this month global supply disruptions reached 2.7 million bpd in July, with analysts saying outages have risen since then.

Libya’s crude exports have shrunk to just over 10 per cent of capacity from three ports, out of a possible nine, as armed groups have tightened their grip on its major industry. Maintenance in Iraq in September is also expected to cut supplies.

“Brent will be supported mainly due to supply disruption,” said Yusuke Seta, a commodity sales manager at Newedge Japan.