5 Min Read
* Obama tries to convince lawmakers of need for action on Syria
* UK's Cameron loses Syria vote
* Saudi to raise oil production to record 10.5 mln bpd-PIRA
* IEA says no need for emergency oil stock release (Adds UK loses vote on military actions, quotes, post-settlement prices)
By Jeanine Prezioso and David Sheppard
NEW YORK, Aug 29 (Reuters) - Oil prices on both sides of the Atlantic extended losses to around 2 percent in late trading after the market settled on Thursday as uncertainty rose over the timing of a possible U.S.-led strike on Syria.
In a day of volatile trading that followed the biggest two-day rally in Brent crude since January 2012, traders booked profits ahead of the U.S. holiday weekend as President Barack Obama and his allies sought to convince cautious lawmakers and the public of the need to strike Syria.
Fears that Western intervention in Syria could spur a wider conflict and destabilize the entire Middle East, which pumps a third of the world's oil, drove Brent prices to a six-month high above $117 per barrel on Wednesday.
"The timeline for any military intervention in Syria appears to have been pushed back for now," said Michael Wittner, chief oil analyst at Societe Generale in New York.
"The oil market was pricing in a possible attack by this weekend, and now it looks like it will be next week at the earliest."
The White House said on Thursday it was contemplating a "very discrete and limited" response to any findings that Syria used chemical weapons.
British Prime Minister David Cameron's plans to support a possible strike were in disarray on Thursday after a majority of lawmakers voted against military action. Cameron said he would not override the will of parliament.
Brent crude for October delivery settled $1.45 a barrel lower at $115.16. In post-settlement trading, prices extended losses to more than $2 a barrel, hitting a low of $114.18.
U.S. crude oil for October delivery settled down $1.30 per barrel at $108.80, after hitting a 2 1/2-year high on Wednesday. It traded down to $107.72 in post-settlement trade.
The International Energy Agency said on Thursday that there was no need for an emergency oil stock release as markets were well supplied, despite the run-up in prices.
Brent oil prices have been mostly on an upward rise since mid-April, with exports from Libya falling to the lowest level since the 2011 civil war.
As armed groups have tightened their grip on Libya's major industry, exports have fallen to around 145,000 barrels per day, compared with a capacity of close to 1.25 million bpd, according to one industry source with close ties to Libya.
Maintenance in Iraq in September is also expected to cut supplies.
"The oil market is already tight and tightening further as losses mount," said Amrita Sen, chief analyst at consultancy Energy Aspects.
Saudi Arabia, the world's largest oil exporter, will pump a record 10.5 million bpd of crude on average throughout the third quarter in a bid to help balance the market, U.S. energy consultancy PIRA said.
"The reason they're producing that much is simple - the world needs the oil," said PIRA CEO Gary Ross. "This is the tightest physical balance on the world oil market I've seen for a long time."
The U.S. Energy Information Administration said global supply disruptions reached 2.7 million bpd in July in a report earlier this month, with many analysts estimating outages have risen since then.
Gasoline and heating oil futures for September delivery also dropped sharply just before the market settled. Those contracts are set to expire on Friday, adding to volatility.
U.S. gasoline futures ended the day at $3.0664 a gallon after trading as high as $3.10, and fell below $3.05 after the settlement. Heating oil settled at $3.18 after trading as high as $3.22.
Brent's premium over U.S. crude futures CL-LCO1=R at one point hit $7.03 per barrel, the widest since late June, on expectations of increased supply at the U.S. contract's delivery point in Cushing, Oklahoma. The spread settled at $6.36.
Traders also eyed positive U.S. data released this week, which may lead the U.S. Federal Reserve to trim its monetary stimulus program sooner rather than later.
U.S. gross domestic product in the second quarter grew by more than double the pace clocked in the previous three months, the Commerce Department said on Thursday.
U.S. financial markets are closed for the Labor Day holiday on Monday, Sept. 2. (Additional reporting by Robert Gibbons and Anna Sussman in New York, Christopher Johnson in London and Florence Tan in Singapore; editing by Jason Neely, Keiron Henderson, Peter Galloway, Gunna Dickson and Phil Berlowitz)