SINGAPORE, Sept 16 — West Texas Intermediate crude fell for a second day amid speculation that the threat of imminent military strikes against Syria has eased as the US pursues a plan to confiscate the nation’s chemical weapons.

Futures dropped as much as 1.3 per cent, extending the biggest weekly loss since July. US Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov agreed on September 14 in Geneva on a framework for finding and destroying Syrian President Bashar al-Assad’s stockpiles of poison gas. Hurricane Ingrid was set to make landfall today on Mexico’s east coast, moving away from the Bay of Campeche, where Petroleos Mexicanos has its two largest oil fields.

“The market is unwinding the Syria premium,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. News of the US–Russia deal “is reducing the probability of escalation,” he said.

WTI for October delivery slid as much as US$1.45 (RM4.80) to US$106.76 a barrel in electronic trading on the New York Mercantile Exchange and was at US$107.31 at 11:20am Singapore time. The contract declined 39 cents to US$108.21 on September 13, capping a weekly slide of 2.1 per cent. The volume of all futures traded was about 41 per cent more than the 100-day average.

Brent for November settlement decreased as much as US$1.45, or 1.3 per cent, to US$110.25 a barrel on the London-based ICE Futures Europe exchange. The October contract, which expired September 13, closed 15 cents higher at US$112.78. The front-month European benchmark crude was at a premium of US$4.13 to WTI. The spread widened for a third day on September 13 to US$4.57.

Early Signs

The US–Russia agreement calls for early signs of progress, giving Assad one week to submit an inventory of his toxic weapons, and calls for initial inspections in Syria by November. Kerry will meet with French President Francois Hollande and his counterparts from France and the UK as he seeks to build support for the plan.

“I see Syria fading as a factor that’s moving oil markets,” Robin Mills, the head of consulting at Manaar Energy Consulting and Project Management in Dubai, said by phone yesterday. “The price had already come off a bit last week when it became evident there was no attack imminent.”

The diplomatic focus now shifts to New York, where the United Nations is preparing to release, as early as today, an inspection team’s report on an August 21 chemical weapons strike outside Damascus that the US says killed more than 1,400 people.

Delayed Strike

Crude rose to a two-year high on August 28 amid concern that a US-led assault would widen the conflict and disrupt Middle East exports. Syria borders Iraq and is near Iran, which together control almost a fifth of the production capacity in the Organisation of Petroleum Exporting Countries, Bloomberg estimates show. The Middle East accounted for 35 per cent of global oil output in the first quarter of this year, according to the International Energy Agency.

President Barack Obama delayed possible US military intervention twice: first on August 31 to consult Congress, then on September 10 to consider Russia’s proposal for international oversight of Syria’s chemicals arsenal.

Hedge funds cut bullish bets on WTI to the lowest level in nine weeks as the US and Russia worked on an agreement. Money managers reduced net-long positions, or wagers that prices will increase, by 5.2 per cent to 290,058 futures and options combined in the seven days ended September 10, the Commodity Futures Trading Commission’s Commitments of Traders report showed on September 13. That was the lowest since July 9.

Hurricane Ingrid

Ingrid, the second hurricane of the Atlantic season, was about 125 miles (201 km) east-northeast of the Mexican city of Tampico and forecast to drop as much as 15 inches (38 cm) of rain over the country’s east, the US National Hurricane Centre in Miami said in an advisory.

Petroleos Mexicanos, known as Pemex, suspended air and sea operations at its rigs in the Bay of Campeche, according to a company statement. The oil ports of Cayo Arcas, which processes about 68 per cent of Mexico’s crude exports, and Dos Bocas were closed, the Merchant Marine said in its daily weather bulletin.

Oil investors are anticipating that the US Federal Reserve will begin scaling back economic stimulus, said Spooner at CMC Markets. “The initiative will be small,” he predicted.

The Federal Open Market Committee, meeting September 17–18, will probably reduce monthly asset purchases to US$75 billion from US$85 billion, according to the median estimate of 34 economists surveyed by Bloomberg News.

WTI has technical support along its 30-day middle Bollinger Band, at about US$107 a barrel today, data compiled by Bloomberg show. Front-month futures have halted intraday declines near this indicator the past four days. Buy orders tend to be clustered around chart-support levels. — Bloomberg