Oil dips below $115 as Syria strike concern ebbs for now

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Oil futures dropped below $115 a barrel on Monday as concerns of an imminent strike on Syria eased, with Russia and China urging Washington to avoid military action ahead of a key Senate vote.

The global Brent crude benchmark dipped more $1.52 to $114.60 a barrel by 1345 GMT after U.S. Secretary of State John Kerry said Syria could avoid a strike by turning over chemical weapons within a week, a timeframe later clarified by a spokeswoman as rhetorical.

U.S. oil lost 67 cents to $109.86.

"Brent is coming off as there is still no news of an imminent U.S. strike so people are taking money off the table," said Rob Montefusco, oil trader at Sucden Financial.

"It is still largely a wait-and-hold situation. There are still a lot of jitters and everything is being prepared, but prices are not going to collapse yet because military action is still fully on the agenda," Montefusco said.

President Barack Obama faces an uphill task to persuade Senate lawmakers to approve on Wednesday military strikes against Syrian Assad's forces.

Russia and Syria urged Washington against military action on Monday, while China called for U.S. caution and a return to the United Nations to discuss Syria.

Obama will give a televised address to the nation on Tuesday, making the case for intervention.

"If they (Senate) vote against intervention oil prices will fall in the near term. If they vote for intervention they will take another leg up and there will be talk of a Strategic Reserve release or even of an immediate release by the U.S. only in an attempt to discourage any knee jerk price rise," PVM analyst David Hufton said.

"If the vote is for intervention Brent will be the contract to be in, not WTI," he said, referring to the U.S. crude contract, known as Western Texas Intermediate.

In the meanwhile, Assad said in an interview that a U.S. military strike would lead to retaliation in "different forms," including "direct and indirect" effects.

Markets were also supported by data which showed China's broad exports rose more than expected in August, boosted by improving demand for the country's goods in major markets and adding to evidence that the world's second-largest economy may have avoided a sharp slowdown.

Rising equities broadly signal economic improvement, which would mean higher oil consumption.

Geopolitical risks were kept elevated on Monday at a time when markets were already coping with a loss of additional supplies from Libya.

"We're still missing crude oil out of Libya and that continues to pressure supplies," said Olivier Jakobs, analyst at Petromatrix.

The market also came under some pressure after crude oil imports by China, the world's largest buyer after the United States, hit a six-month low in August and were down 17.9 percent from July, trade data showed on Sunday, due to overhauls at several major refineries. (Additional reporting by Osamu Tsukimori in Tokyo; editing by William Hardy)



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