Crude oil prices drop as Libya output rises

Crude oil prices drop as Libya output rises

West Texas Intermediate crude dropped to a one-month low as Libya’s oil production rose and the threat of military strikes against Syria receded, damping concern that supplies from West Asia may be cut. Futures capped the biggest weekly drop in three months. Syria disclosed an initial inventory of chemical weapons as Iranian president Hassan Rohani said his country would never seek nuclear arms. The fall accelerated on concern that wrangling over spending may shut the US government.

“The stars are aligning for a bearish market,” said Michael Lynch, president of Strategic Energy and Economic Research in Winchester, Massachusetts. “Libyan and Iraqi production is rising, which will lead to greater supply. The Syrian and Iranian situations appear to be calming down, which is tapering the geopolitical premium a little bit.”

WTI crude for October delivery, which expired on Saturday, fell $1.72, or 1.6 per cent, to $104.67 a barrel on the New York Mercantile Exchange, the lowest settlement since August 21. Prices slid 3.3 per cent this week, the biggest five-day drop since June. The more actively traded November contract slipped $1.11, or 1 per cent, to $104.75. The volume of all futures traded was about 8.4 per cent below the 100-day average at 3:18 pm. Brent oil for November settlement rose 46 cents, or 0.4 per cent, to end the session at $109.22 a barrel on the London-based ICE Futures Europe exchange. Futures fell 3.2 per cent this week.

Oil prices will drop further next week after a US-Russian agreement reduced the risk of an American attack on Syria, according to a Bloomberg survey of 34 analysts. The accord was reached on Septemebr 14 in Geneva and sets a timetable for president Bashar al-Assad to declare, secure and then eliminate his entire chemical arsenal. WTI reached a two-year high on August 28 amid concern that a US-led assault would widen the Syrian conflict.

Textile companies, too, will benefit, especially those operating in the manmade fiber segment. POY is the basic raw material for the powerloom weaving sector and in the last two months prices rose by Rs 10-14 per kg. Crude oil derivatives such as purified terephthalic acid and mono ethylene glycol are the primary raw materials constituting about 50-% of the total sales value for polyester yarn.