Crude oil inches lower; Syria conflict remains in spotlight

Investing.com - Crude oil futures inched lower during European morning hours on Monday, but losses were limited as market players continued to monitor developments surrounding a possible U.S. military strike on Syria.

On the New York Mercantile Exchange, light sweet crude futures for delivery in October traded at USD110.03 a barrel during European morning trade, down 0.45%.

New York-traded oil futures held in a range between USD109.78 a barrel, the daily low and a session high of USD110.38 a barrel. The October contract settled 1.99% higher at USD110.53 a barrel on Friday, the highest closing price since May 3, 2011.

Oil futures were likely to find support at USD106.55 a barrel, the low from September 3 and resistance at USD112.22 a barrel, the high from August 28.

U.S. lawmakers are scheduled to reconvene Monday after a five-week summer-break, with a vote on taking military action against Syria’s government for its alleged use of chemical weapons expected by the end of the week.

Syrian President Bashar al-Assad denied authorizing the August 21 chemical weapons attack, which killed over 1,400 people, hundreds of them children.

President Barack Obama will make his case for military strikes against Syria’s government in a televised address on Tuesday.

Russian President Vladimir Putin warned the U.S. against launching military action against the Syrian government without U.N. approval on Friday.

Speaking at a news conference following the Group of 20 summit in St. Petersburg on Friday, Putin said Russia would "assist" Syria if the country is attacked.

While Syria is not a major oil producer, investors fear that the two-year-old civil war could spill over to affect oil supplies in nearby countries.

Market players are also concerned about the involvement of Iran and Saudi Arabia in such a conflict. The two countries are major oil producers.

U.S. Secretary of State John Kerry said Sunday that Saudi Arabia will back a U.S.-led strike against Syria.

Oil prices surged to a 27-month high of USD112.22 a barrel on August 28 amid indications the U.S. was close to taking military action against Bashar al-Assad’s government.

Meanwhile, market players digested a raft of economic data out of China, the world’s second largest economy.

The Chinese National Bureau of Statistics said earlier that consumer price inflation rose 2.6% in August, in line with expectations and slowing from 2.7% in July.

The inflation report came one day after data showed that China’s trade surplus widened to USD28.6 billion from a surplus of USD17.8 billion in July, compared to estimates for a surplus of USD20 billion.  

Chinese exports rose 7.2% from a year earlier in August, beating expectations for a 6% increase and following a 5.1% gain in July.

However, imports of crude oil fell to a six-month low of 21.43 million tonnes in August, 17.9% lower from July.

Investors continued to speculate over the timing of the Federal Reserve’s widely expected reduction in monthly bond purchases following Friday’s weaker-than-forecast U.S. jobs report.

The Department of Labor said that the U.S. economy added 169,000 jobs in August, fewer than the 180,000 forecast by economists and jobs growth for the two previous months was also revised lower.

The report sparked renewed uncertainty over whether the Fed will start to unwind its USD85 billion-a-month asset purchase program at its upcoming policy meeting on September 17-18.

The Fed’s stimulus program is viewed by many investors as a key driver in boosting the price of commodities as it tends to depress the value of the dollar.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for October delivery shed 0.3% to trade at USD115.80 a barrel, with the spread between the Brent and crude contracts standing at USD5.77 a barrel.