London: Brent crude inched up towards $108 on Tuesday as a sell-off in the previous session provided investors with some buying opportunity in the broader markets and with some support from tensions in the oil rich Middle East and low oil stocks.
Brent rose 34 cents to $107.60 a barrel by 03:10 pm, bouncing from the low of $107.07. US crude ticked up by 20 cents to $97.97 a barrel.
On Monday, Brent fell $1.36 a barrel and US crude dropped by $1.64.
“Oil prices are bumping along the bottom in spite of a bearish European picture,” Christopher Bellew with Jefferies Bache said.
The sell-off in European stocks and the euro also eased but concerns the region remains a long way from solving its sovereign debt crisis was seen likely to keep the pressure on.
Bellew added the expect fall in US crude might add some support to oil prices.
US commercial crude stockpiles are expected to have fallen on average 1.6 million barrels for last week, a preliminary Reuters poll of seven analysts showed ahead of the weekly data releases from the industry group on Tuesday and from the Department of Energy on Wednesday.
Oil stocks in the United States, the second biggest energy consumer after China, have already remained significantly below a year earlier levels.
Prices trimmed gains briefly after the International Energy Agency (IEA) said it had lowered its oil demand forecast for 2011 and 2012 and supply increased.
Iran could lose almost a quarter of its oil production capacity by 2016 if tight global sanctions are slapped on the country, the West’s energy watchdog said on Tuesday, while questioning the efficiency of a possible embargo imposed by the European Union.
OPEC oil producers, including Saudi Arabia, the world’s top oil exporter, Iran and others, will meet on Wednesday to review its output policy.
The group on Monday targeted a new 30-million barrel-a-day production deal aimed at healing a rift left by a bad-tempered failure to reach an output agreement when it last met in June.
At stake for the Organization of the Petroleum Exporting Countries is a credible policy going into a year when a sluggish global economy could undermine fuel demand and send oil prices tumbling.
“It would be in the OPEC members’ best interest to come up with an agreement after they failed to do so in the last meeting,” said Natalie Robertson, an analyst at ANZ Bank.
Financial markets are awaiting the outcome of a US Federal Reserve meeting later in the day. The policy-setting Federal Open Market Committee looks set to hold off on easing monetary policy as it gauges the impact of Europe’s crisis.
The United States has had a series of positive numbers, raising hopes of a steady economic recovery in the country and helping boost demand in the world’s biggest oil consumer.
Unrest in the Middle East is helping put a floor under prices as participants worry about supply disruptions.
An explosion ripped through a gas pipeline near the town of Rastan in the central Syrian province of Homs and flames were seen rising from the site, a witness said, in the second reported blast at an energy pipeline in Homs in a week.