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Crude slips on Syria chemical weapons deal

Crude oil prices fell in mid-September as the US and Russia announced a deal had been reached to dispose of Syria’s chemical weapons by mid-2014

Brent and WTI slid to around $109 a barrel (/b) and $106/b, respectively, on 16 September. The benchmark crudes traded at around $113/b and $109/b, respectively, the previous week.

On 14 September, US Secretary of State John Kerry said an initial agreement had been reached for Syria to hand over a complete list of its chemical weapons stockpile to the United Nations. The list would be handed over by the week of 23 September.

In a note released shortly after Kerry’s announcement, Deutsche Bank said that easing expectations of an imminent strike against Syria had eased some of the pressure on oil prices. Increased global oil supply from non-Opec nations, mainly the US, as well as “more muted stockpiling” from China also put pressure on prices, the bank said.

At the end of August, Brent soared to seven-month highs of $115/b on the back of escalating geopolitical tensions between Syria, Russia and the US. The US called for military intervention in Syria over allegations the country had used chemical weapons in an attack on civilians in Damascus.

The near total shut-in of Libyan production also bolstered crude prices in August, the International Energy Agency (IEA) said, as civil unrest and labour disputes continue to disrupt output.

The IEA expects global oil demand to rise by 895,000 barrels a day (b/d) this year to reach 90.9m b/d. The agency said global crude demand will rise by a further 1.1m b/d in 2014 on expectations that the global macroeconomic situation will improve.

However, the agency said currency depreciation in a number of emerging markets, such as India, Indonesia, Malaysia and Peru, has increased the risk of crude demand falling in those countries.

The long-term fall in OECD oil demand has been slowing lately while demand growth from emerging markets has also been reined in. The fall in OECD oil demand slowed in the second quarter of 2013, to 0.3%, the IEA said. This is compared to an average 1.7% rate of decline over the past five years. Non-OECD oil demand growth also slowed to 2.6% in the second quarter of 2013, the IEA said, compared to an average growth rate of 3.6%.

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