Oil inches up on inventories data, Syria plans

Oil prices marked a minor advance on Thursday as the American Petroleum Institute reported that U.S. crude reserves fell more than expected last week. Senate authorization for a limited U.S.-led attack against the Syrian regime eased concern over the conflict spreading into the entire region, while speculation that the Federal Reserve will begin tapering its monetary stimulus also pressured the market. Investors await upcoming EIA oil data at 15:00 GMT.

On the New York Mercantile Exchange, WTI crude for October delivery rose by 0.19% to $107.43 per barrel at 6:29 GMT. Prices held in a narrow range between days high and low of $107.57 and $107.25 per barrel respectively. Futures slipped 0.9% on Wednesday but trimmed its weekly decline to 0.2% following Thursdays advance.

Meanwhile on the ICE, Brent oil futures for October settlement traded at $115.14 a barrel at 6:32 GMT, marking a 0.10% gain. Prices ranged between days high and low of $115.24 and $114.84 per barrel respectively. The European benchmark fell by 0.5% on Wednesday but extended its weekly advance to 0.9% on Thursday.

Oil prices received a boost after the industry-funded American Petroleum Institute reported on Wednesday that U.S. crude stockpiles fell by 4.16 million barrels in the week ended August 30. Gasoline inventories decreased by 387 000 barrels, while distillate fuel supplies dropped by 109 000 barrels. APIs data however is considered as less reliable than EIAs statistics as it is based on voluntary information from operators of refineries, pipelines and bulk terminals.

The Energy Information Administration will publish its weekly crude oil inventories report later today instead of Wednesday due to the Labor Day holiday in the U.S. on Monday. According to a Bloomberg survey of analysts, the report should show that crude reserves fell by 2 million barrels last week, while gasoline inventories probably dropped by 700 000 barrels. Distillate fuel supplies are expected to have increased by 600 000 barrels.

Demand prospects were boosted as data showed yesterday U.S. automobile sales gained at the fastest pace since October 2007.

Oil gains however remained limited as concern over an all-out attack against Syria eased after the Senate Foreign Relations Committee voted on Wednesday to authorize President Barack Obama to conduct a limited military attack against the Syrian regime. This was the first hurdle to overcome before the Congress carries out a vote on September 9 after its 5-week recess ends.

Victor Shum, a vice president at IHS Energy Insight, a consultant in Singapore, said for Bloomberg: “It’s not an all-out military attack that’s been approved. This limited OK is therefore not supporting oil that much and it might be limiting gains from a possible attack in Syria.”

The resolution voted by the Senate Foreign Relations Committee authorized a limited use of force in a specified manner against “legitimate military targets” with a 60-day timetable and a possible extension of 30 days, upon the presidents request. The use of U.S. ground troops was barred.

Meanwhile, market players are looking ahead into this weeks upcoming key U.S. data to gauge the American economy’s strength and oil demand outlook. Thursday’s ADP Employment Change will provide preliminary information for the U.S. labor market and EIA’s weekly crude oil inventories report will give an insight into current U.S. demand. Also on Thursday, Q2 Non-Farm Productivity and Unit Labor Costs should have increased, while the ISM Non-Manufacturing Composite and Factory Orders are expected to have declined. On Friday, the highly anticipated U.S. Non-Farm Payrolls should have surged in August, while the Unemployment Rate likely remained unchanged at 7.4%. Average Hourly Earnings and Average Weekly Hours are anticipated to have increased as well.

Upbeat data will reinforce many market players speculations that the Federal Reserve will start paring its Quantitative Easing program in September. A Bloomberg poll last month showed that 65% of the economists surveyed expected a reduction in the bond purchases after this months FOMC meeting.

Ric Spooner, chief market analyst at CMC Markets, said for Reuters: “We may see a few dollars coming off on oil from here if there is any announcement on the stimulus. It will weigh on oil as the dollar will strengthen.”