London: Oil eased slightly on Wednesday, but was supported by a weaker dollar, supply disruption in the United States and violence in the Middle East, countering fears of soft demand prompted by weak economic data.
Optimism that a deal would be done to deliver struggling Greece a fresh aid package lifted the euro to a four-week high against the dollar. A weaker dollar makes oil cheaper for those holding other currencies.
“If euro/dollar closes above a 50 day moving average it will lead to a bullish trend for the euro from here and there could be more positive momentum for oil,” Thorbjorn Bak Jensen, oil market analyst at A/S Global Risk in Copenhagen said.
The stronger dollar and retreating anxiety over problems facing the euro zone countered poor data from Europe, China and the United States, which is negative for the demand outlook for energy.
Also supporting crude prices, pipeline disruptions to US supply have hit the world’s largest oil consumer just as it enters the summer driving season.
TransCanada Corp said it will take several days to re-open its 591,000 barrel per day (bpd) Keystone oil pipeline to the Cushing, Oklahoma, oil hub after the second spill in less than a month forced it to shut at the weekend.
Enbridge Inc restored power on Wednesday to three pumping stations on a 290,000 bpd pipeline that had lost electricity supply after severe storms.
By 1:19pm, US crude gained 7 cents to reach $102.77 a barrel, not far off of a three-week high reached the previous session.
Brent crude traded down 32 cents at $116.41 a barrel. The sell-off in commodities earlier in May led to Brent posting a 7.3 percent loss for the month, its biggest monthly percentage loss in a year.
European manufacturing growth slipped sharply while Chinese factories expanded in May at their slowest pace in at least nine months.
On Tuesday, US consumer confidence slid in May as consumers turned more pessimistic on the outlook for the labor market and inflation worries rose, according to a private sector report released on Tuesday.
Street fighting raged in Yemen’s capital on Tuesday ending a tenuous ceasefire between tribal groups and forces loyal to President Ali Abdullah Saleh and edging the impoverished Arab state closer to civil war.
“The ongoing tension in Yemen is raising concerns while crude supply disruptions are also supportive of oil prices,” said Singapore-based oil analyst Serene Lim of ANZ Bank.
Flashpoints in Yemen have multiplied this week with fighting in the capital, government troops gunning down protesters in Taiz in the south and a battle with al Qaeda and Islamic militants in the coastal city of Zinjibar.
Yemen is a small independent producer, but the concern for oil markets is of chaos creating a haven for al Qaeda militants, spreading to neighbour and the world’s biggest oil exporter Saudi Arabia.
Technical analysis for Brent and US crude was bullish, with 24-hour targets at $118.43 and $105.10 a barrel respectively, said Reuters market analyst Wang Tao.
Investors await U.S. ADP employment data for May released at 5:45pm, for clues on the closely watched non-farm payrolls data released on Friday. US ISM manufacturing PMI data for May at 1400 GMT will also be scrutinised.