09/10/2013 01:29 EDT | Updated 11/10/2013 05:12 EST

Oil drops almost 2% to US$107.39 as fears of military intervention in Syria ease

NEW YORK, N.Y. - Oil dropped nearly two per cent Tuesday as support grew behind a plan for Syria to cede possession of its chemical weapons in a move to avoid a potential U.S. military strike.

Benchmark West Texas Intermediate crude for October delivery fell $2.13, or 1.9 per cent, to close at US$107.39 a barrel on the New York Mercantile Exchange. It was the biggest one-day decline in three weeks.

Oil prices have been at elevated levels for two weeks following President Barack Obama's call for military action against the government of Syrian President Bashar Assad in retaliation for what the White House says was a chemical weapons attack against civilians.

But on Tuesday, a diplomatic solution seemed at hand after Syria said it had accepted a deal pushed by Russia — and based on comments by U.S. Secretary of State John Kerry — to put its chemical weapons under international control for their later dismantling.

As the Syrian situation develops, traders will be also monitoring fresh information on U.S. stockpiles of crude and refined products.

Data for the week ended Sept. 6 are expected to show declines of two million barrels in crude oil stocks and one million barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

A report on stockpiles from the U.S. Energy Department's Energy Information Administration — the market benchmark — will be out on Wednesday.

Brent, the benchmark for international crudes, dropped $2.47, or 2.2 per cent, to US$111.25 per barrel on the ICE Futures exchange in London.

In other energy futures trading on Nymex, wholesale gasoline fell seven cents to US$2.74 a U.S. gallon (3.79 litres), heating oil lost five cents to US$3.07 a gallon and natural gas lost two cents to US$3.58 per 1,000 cubic feet.