Singapore: Brent crude steadied above $109 a barrel on Tuesday on hopes Europe would take further action to tackle its intractable debt crisis, while supply worries stemming from North Sea maintenance and Middle East tensions also supported prices.
The European Central Bank last week said it may again start buying government bonds to reduce crippling Spanish and Italian borrowing costs, but details of how it will stabilise the bloc’s bond markets have yet to be fleshed out.
“The market is trying to interpret everything that’s coming out of the ECB so there is a lot of indecisiveness across assets,” said Ben Le Brun, a Sydney-based market analyst at OptionsXpress.
“The uncertainty, coupled with tension in the Middle East, is giving a slightly positive impact to oil prices.”
Brent crude for September delivery inched down 2 cents to $109.53 a barrel by 08:30 am, after closing at the highest level in 11 weeks.
US crude edged down 13 cents to $92.07.
The drop in crude prices were kept in check as the violence in Syria and Iran’s dispute with the West over Tehran’s nuclear program continued to keep investors worried about the potential threat to oil supply from the region.
Hopes that the United States and China -- the world’s top two oil consumers -- will adopt stimulus measures to boost growth was also a positive for the oil market.
China will release from Thursday a deluge of data ranging from industrial output to investment which are likely to show the world’s second-largest economy is, at best, stabilising rather than recovering briskly.
“We’re looking for some consolidation on industrial production before it starts improving again,” Le Brun said.
Tighter North Sea Supply
On the supply side, expectations of a sharp fall in output from the North Sea’s second-largest crude oil stream in September kept the September Brent price sharply higher than October, a market condition known as backwardation and points to strong prompt demand.
In North America, investors were also watching Tropical Storm Ernesto which is forecast to move into the southern part of the Gulf of Mexico by Thursday, but it was too early to know if it could disrupt oil and gas operations in the gulf.
Crude stockpiles in the United States were forecast down last week for a second straight time, a preliminary Reuters poll showed.
Tensions in the Middle East also underpinned oil prices.
Syria’s prime minister fled the country on Monday as fighting continues while a pipeline explosion halted Iraqi crude exports to Turkey.
Sudan will resume talks with South Sudan on 26 August to resolve remaining conflicts after reaching an interim oil agreement, the Sudanese state news agency SUNA said.
Disputes between the countries have reduced Sudanese crude exports by about 350,000 barrels per day from early this year.