The price of oil fell slightly after it climbed to a high for the year Monday, as the market waits to see the results of this week’s Federal Reserve policy meeting.
Benchmark oil for July delivery fell 8 cents to finish at $97.77 a barrel on the New York Mercantile Exchange. Earlier, crude rose to $98.74, the highest level since mid-September.
Concern that the conflict in Syria could spread and disrupt oil supplies from key producing countries has boosted oil. Jim Ritterbusch, president of oil consultancy Ritterbusch and Associates, speculated that the White House’s decision to arm rebels in the country has added $2 to the price of a barrel.
But Ritterbusch and others questioned how much more of a “security premium” could be packed into the price of oil.
“We still have some difficulty associating a minor escalation in the Syrian conflict with any significant supply disruptions from nearby oil producers such as Saudi Arabia and Iraq,” Ritterbusch said in a daily note to clients.
Julian Jessop, head of commodities research at Capital Economics, predicted in a note to clients that the U.S. and its allies would respond to any disruption in supplies by releasing oil from strategic reserves in order to suppress any price spike.
Hopes that the U.S. Federal Reserve will maintain its aggressive stimulus measures have also lifted oil and U.S. stock markets. The central bank’s policy of ultra-low interest rates has made riskier assets like stocks and oil more attractive than low-yielding bonds.
Some investors worry that long-term interest rates could spike when the Fed tightens monetary policy, threatening the economic recovery. The Fed concludes a two-day policy meeting Wednesday.
The Dow Jones Industrial Average and the Standard and Poor’s 500 index each rose Monday.
The election of Hasan Rowhani as president of Iran helped contain some of the upside in the price of oil. Considered a moderate, Rowhani’s election is being viewed as lowering the potential of further conflict in the Middle East, which supplies around a third of the world’s crude.
In the U.S., the average price for a gallon of gasoline dropped about 1.5 cents to $3.61. Prices in the Great Lakes region have retreated, after soaring for the past month when refinery outages caused a shortage of supplies.
Brent crude, a benchmark for many international oil varieties, fell 46 cents to end at $105.47 a barrel on the ICE Futures exchange in London.
In other energy futures trading on the Nymex:
- Wholesale gasoline fell 4 cents to finish at $2.86 a gallon.
- Heating oil dropped 1 cent to end at $2.95 per gallon.
- Natural gas advanced 14 cents to finish at $3.88 per 1,000 cubic feet.