The price of oil hovered around $107 a barrel on Wednesday, a day after President Barack Obama said he asked U.S. lawmakers to postpone a vote authorizing the use of military force against Syria.
By early afternoon in Europe, benchmark oil for October delivery was down 14 cents to $107.25 a barrel in electronic trading on the New York Mercantile Exchange. On Tuesday, the contract fell $2.13, or 1.9 percent, to close at $107.39 a barrel on the Nymex.
Obama, in a televised speech to the nation late Tuesday, said he wanted to give Syria a chance to turn over its chemical weapons before he asks Congress for consent to intervene in the country's civil war.
Oil prices have been at elevated levels for two weeks following Obama's call for action against the government of Syrian President Bashar Assad in retaliation for what the White House says was a deadly chemical weapons attack against civilians last month.
Syria's surprise announcement Tuesday that it would accept a Russian plan to turn over its chemical weapons stockpile raised the possibility of a resolution to the standoff between Obama and Assad and lowered tensions in oil markets.
"In view of the abating geopolitical risks, oil prices are likely to fall further, for the oil price level is still too high from a purely fundamental perspective," analysts at Commerzbank in Frankfurt said in a report, listing ample global supplies and strong production by OPEC members as factors weighing on prices.
While prices edged off a recent two-year high as the likelihood of a Syrian strike diminished, some analysts predicted prices would remain high for the time being. "Although recent political events have decreased the probability of an international military intervention in Syria, we still see the risks to oil prices as skewed to the upside over the next several months," said analysts at Goldman Sachs in an email commentary.
Market fluctuations appeared to support this view, as the Nymex contract fell as low as $106.53 earlier Wednesday before traders began buying again, taking advantage of the dip and betting on the situation in Syria to keep supporting prices.
Syria is not a major oil producer, but oil traders say the possibility of a wider conflict could interrupt production and shipping routes in the Middle East and cause prices to rise. A draw of 2.9 million barrels in U.S. crude stocks last week, as reported late Tuesday by the American Petroleum Institute, also sustained prices. Data from the Energy Department's Energy Information Administration — the market benchmark — will be out later Wednesday.
Brent, the benchmark for international crudes, was up 53 cents to $111.78 a barrel on the ICE Futures exchange in London. In other energy futures trading on Nymex: — Wholesale gasoline rose 0.26 cent to $2.7383 per gallon.
— Natural gas lost 1.7 cents to $3.567 per 1,000 cubic feet. — Heating oil added 1.45 cents to $3.0813 per gallon.
Pamela Sampson in Bangkok contributed to this report.