U.S. oil prices declined Friday, continuing to pull back from a mid-week rally sparked by the Federal Reserve's surprise decision to continue its easy money policies, while concerns over Middle East supply disruptions continued to fade away.
Meanwhile, Brent futures moved higher as analysts said the European benchmark didn't experience the same degree of fervor over the U.S. central bank's announcement and recent declines to prices due to the resumption of Libyan oil production were overdone.
Light, sweet crude for October delivery, which expires at the end of the trading session, fell 65 cents, or 0.6%, to $105.74 a barrel on the New York Mercantile Exchange. The more heavily-traded November contract declined 38 cents, or 0.4%, to $105.48 a barrel.
Over the past two days, U.S. oil futures, known as West Texas Intermediate, or WTI, have given back most of the gains they accumulated Wednesday upon word the Fed would continue its $85 billion-a-month bond buying program, a measure that's weakened the dollar, making oil cheaper to buy using other currencies.
"WTI is unwinding some of the pent-up excitement from the Fed's non-tapering decision and the risk premium from fears over military intervention in Syria, combined with the return of production in Libya," said Matt Smith, analyst at Schneider Electric, a commodity consulting firm.
Brent crude for November delivery on ICE Futures Europe rose 40 cents, or 0.4%, to $109.16 a barrel.
"We saw WTI outperform on Wednesday after the Fed announcement and there wasn't that exuberance in Brent. So that's reflective in a non sell-off today," he said.
Market participants had added several dollars to the price of crude in recent weeks, betting that a U.S.-led military strike in Syria could spread throughout the Middle East--a region that produces a third of the world's oil--and interfere with the flow of crude through major pipelines and sea routes.
But over the past week those fears have abated as diplomacy has taken center stage. On Thursday, the Obama administration warned Syria that it must comply with an agreement to destroy its chemical weapons as a key deadline neared. Syrian President Bashar al-Assad has said the country would provide information about the weapons stockpile to international authorities.
U.S. officials have indicated Syria must submit a declaration of the location and amounts of its chemical-warfare arsenal, though it's unclear if the deadline for that action is Friday or Saturday.
Another factor that continues to pressure oil futures is Libya's rebound in crude production. The country had seen its oil output plunge amid labor disputes that closed several of its crude export terminals. But several media outlets, including Bloomberg News, have said the country's production could ramp up to 800,000 barrels a day.
That level is a drastic improvement over the 150,000-barrel a day production that Libya recently reported, though its still below its recent high of 1.4 million barrels a day.
In a research note, Dominick Chirichella, an analyst at the Energy Management Institute, wrote, "if this is not yet another fake-out with Libya, it could be a turning point and start to act as a short-term cap on oil prices."
Front-month October reformulated gasoline blendstock, or RBOB, recently rose 0.92 cents, or 0.3%, to $2.7064 a gallon. October heating oil gained 1.07 cents, or 0.4%, to $3.0143 a gallon.
