09/16/2013 03:42 EDT | Updated 11/16/2013 05:12 EST

Oil below US$107 on diplomatic deal for Syria to turn over chemical weapons

The price of oil fell below US$107 a barrel Monday on waning fears of a wider Middle East conflict thanks to an international deal intended to halt the use of chemical weapons in Syria.

Benchmark West Texas Intermediate crude for October delivery fell $1.62 to US$106.59 a barrel on the New York Mercantile Exchange. The contract for November delivery for Brent crude, the benchmark for international crudes used by many U.S. refineries, fell $1.60 to US$110.10 a barrel in London.

Oil prices are moderating because the deal between American and Russian chemical weapons negotiators had reduced the chance of U.S. military action in Syria and the possible spread of Middle East violence.

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. In recent days, oil prices have risen and receded in accordance with the perceived likelihood of a U.S. military attack.

Prices have not fallen further, traders say, because civil unrest and labour conflicts in Libya, which is a major oil producer, have reduced the country's exports.

"The more fundamental issue of constrained Libyan exports continued unabated," said a report from JBC Energy in Vienna.

In other energy futures trading in New York, wholesale gasoline fell 5.3 cents to US$2.717 a U.S. gallon (3.79 litres), heating oil fell five cents to US$3.064 a gallon and natural gas rose 6.1 cents to US$3.738 per 1,000 cubic feet.