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Oil market pauses after 15-month peak

12 July 2013, 16:48AFP

London - Oil prices steadied on Friday a day after they struck 15-month high points on the back of the Federal Reserve's stimulus pledge, strong US crude demand and concern over Middle East supplies.

Brent North Sea crude for delivery August edged up three cents to $107.76 a barrel in London midday deals.

New York's main contract, West Texas Intermediate for August, lost 19 cents to $104.72 a barrel

The oil market had rallied on Thursday after Federal Reserve chairman Ben Bernanke pledged to retain the US central bank's massive bond-buying programme, analysts said.

New York crude on Thursday hit $107.45 a barrel, a high last seen in late March 2012. Brent the same day jumped to a three-month high at $108.93.

"Prices have picked up almost 10% since the start of the month on a mixture of positive economic data, reassurance of further Fed support and global supply concerns," Sucden brokers analyst Kash Kamal said on Friday.

On Wednesday, Bernanke said that the Fed's $85bn-a-month stimulus drive, known as quantitative easing (QE), would be kept in place "for the foreseeable future".

The news poured cold water on market expectations that the bank would start to wind it down later this year, which has sent global equity indices reeling in recent weeks.

Bernanke insisted that the Fed's easy-money policy was still necessary, because the unemployment rate at 7.6% was still too high and inflation was too low for comfort, despite signs of improvement in the US economy.

Oil prices have risen over the past fortnight, also on fears of Middle East supply disruptions triggered by an escalation in the Syrian conflict and the military coup in Egypt.

"Uncertainty in Egypt is contributing to the current premium on crude benchmarks," added Kamal.

"With no clear signs of a resolution, instability could spread further in the region threatening oil supply and providing a lift to Brent contracts."

The US government's Energy Information Administration said oil stockpiles tumbled 9.9 million barrels in the week ended July 5. That was more than triple market expectations for a 2.9-million-barrel decline, and followed the prior week's drop of nearly 10 million barrels.

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