Brent crude held above $115 a barrel today, set for a fourth weekly rise and supported by concerns that a potential US military strike on Syria may spread unrest in the Middle East and disrupt supply.
Investors also eyed key US jobs data due later that could help determine a timeline on when the Federal Reserve will start winding down its massive stimulus programme.
“There was some shortcovering of the WTI-Brent spread ahead of the U.S. employment data and Syria,” said Ken Hasegawa, a commodity sales manager at Newedge Japan.
October Brent had edged down 8 cents to $115.18 a barrel by 0448 GMT. West Texas Intermediate (WTI) crude for October delivery fell 8 cents to $108.29 after gaining $1.14 a barrel in the previous session.In less than two months, Brent’s premium to US crude has swung from parity to as wide as $9, a level not seen since early June.
The spread had narrowed on a fall in crude stockpiles at WTI’s delivery point in Cushing, Oklahoma, to the lowest in 18 months, although it quickly widened on jitters over tensions in the Middle East and supply cuts in the North Sea, Libya and Iraq.
The US government will vote next week on president Barack Obama’s proposal to launch a missile strike on Syria to punish president Bashar al-Assad for his suspected use of chemical weapons against civilians.
Mr Obama faced growing pressure from Russia's Vladimir Putin and other world leaders not to act, as many of them fear a strike would hurt the global economy and push up oil prices.
Oil prices may fall as the chances of unrest spreading to other Middle Eastern countries and causing supply disruption were slim even in the event of a military strike, Mr Hasegawa said.
Oil could also be capped by expectations that the Fed will start rolling back its stimulus programme, which will tighten liquidity in global markets and strengthen the US dollar. A stronger greenback could depress oil as dollar-denominated commodities become less affordable to holders of other currencies.
Brent could trade within a range of $112-$117 a barrel and WTI at $106-$111 before the release of US employment data later today, Mr Hasegawa said.
Solid US jobs and service sector data yesterday bolstered views the Fed could start slowing its bond-buying programme as soon as this month, but plunging orders for factory goods highlighted uncertainty around the economic outlook. (Reuters)
