London: Brent crude bounced on Wednesday after three days of losses, supported by hopes the Federal Reserve might hint at more measures to boost the US economy, although retreating from earlier highs on renewed euro zone debt worries.
Brent crude was up 58 cents at $110.12 a barrel by )4:45 pm after earlier reaching as high as $110.94. Brent prices rose 6.6% last month.
US crude on the New York Mercantile Exchange was up 77 cents to $92.93 a barrel.
The US Federal Open Market Committee, which concludes its two-day policy meeting on Wednesday, may offer hints of further monetary easing to revive the US economy, which would pressure the dollar.
This provided support for demand-sensitive assets such as oil, which benefits from a weakening of the dollar as it becomes more affordable to holders of other currencies.
Investors were wary about the sustainability of the gains, however, with weak data and festering euro zone debt problems seen as weighing on markets.
Emphasizing the frailty of the markets, oil pared gains and equities turned negative after the European Financial Stability Facility (EFSF) decided not to go ahead with a €3 billion maximum 10-year bond sale, fuelling worries over Europe’s efforts to tackle its debt crisis.
Analysts said that the outlook for Brent was clouded by further news coming out of the euro zone.
“Oil is resilient as demand outside Europe and the US remains relatively strong, but it’s riding on sentiment and it’s going to be rocky over the next few weeks,” said Helen Henton, an analyst at Standard Chartered.
Greek Prime Minister George Papandreou won the backing of his cabinet on Wednesday to hold a referendum on a €130 billion ($177.8 billion) bailout package, a decision that sent markets into a tailspin in the previous session.
Papandreou will later face the leaders of France and Germany, who summoned him for crisis talks in Cannes before a G-20 summit of major world economies, to push for quick implementation of the bailout deal.
Adding to the gloom, the downturn in euro zone manufacturing in October was deeper than previously reported, according to business surveys on Wednesday that showed how severely the currency union’s debt crisis has choked new factory orders.
This followed data on Tuesday showing slower manufacturing activity in China and the United States, the world’s largest oil consumers.
Investors were also watching for any fallout from Monday’s bankruptcy filing by brokerage MF Global Holdings Ltd following the discovery that the company failed to protect customer accounts by keeping them separate from its own funds.
US weekly crude inventory data scheduled for later on Wednesday may show an increase in the country’s commercial crude stocks for a second consecutive week, a Reuters poll of analysts showed on Tuesday.
But the industry group American Petroleum Institute, in a report late on Tuesday, said domestic crude inventories fell 156,000 barrels last week.
A fall in surplus crude at Cushing, Oklahoma, the pricing point for West Texas Intermediate crude, will narrow the price spread between US crude futures and ICE Brent in the next 12 months, Goldman Sachs said.
Henton at Standard Chartered also saw the spread between US and Brent crude narrowing.
“There’s lots of supply coming back from Libya, Angola and in the North Sea with the Buzzard field, so the market should loosen more over the next few weeks.