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Oil steady near 3-month highs on supply worries

16 August 2012, 16:10

London - Oil steadied near three-month high on Thursday, supported by worries over possible disruptions to supply from the Middle East and a steep fall in U.S. oil inventories.

Global crude oil benchmark Brent has risen more than a third in less than two months on escalating worries about a conflict over Iran's nuclear programme.

Meanwhile, investors hope for more stimulus measures from central banks that would boost commodities.

A fall in production in the North Sea during Sept., due to maintenance, has also tightened supply in Europe and helped push up the price of light, sweet crude for immediate delivery.

Brent futures fell five cents to 116.20 dollars per barrel, after ending 2.22 dollars up at the highest settlement since May 2.

U.S. crude lost 20 cents to 94.13 dollars, after rising 90 cents to its highest settlement since May 14.

"As long as it keeps focusing on the chances of war in the Middle East and  quantitative easing in the United States, this market will stay strong," said Carsten Fritsch, commodity analyst.

"But the market has been overbought for a while and these levels are not justified by fundamentals, which show plenty of oil available and demand growth slowing."

The Organisation of Islamic Cooperation (OIC) on Thursday suspended Syria's membership at a summit of Muslim leaders in Mecca, citing President Bashar al-Assad's violent suppression of the Syrian revolt.

Data on Wednesday showing a sharp fall in stocks of oil in the world's top consumer, the United States, has also exacerbated global supply worries.

U.S. crude stockpiles fell more than expected last week, slipping 3.7 million barrels to 366.16 million barrels, the Energy Information Administration reported, despite a modest rise in crude imports as plant utilization remained high.

Analysts had forecast a drop of 1.7 million barrels.

Inventories of refined products were mixed, with gasoline stocks down 2.37 million barrels against an expected 1.5 million barrels.

Distillates, which include diesel and heating oil, rose 677,000 barrels versus a forecast decline of 200,000 barrels, the EIA said.

Crude stocks may have also declined in part due to the fall in output because of hurricanes in the United States.

"This could be due to plant utilization as they say, but it is certainly affected by market disruptions from bad weather in the U.S.," said Natalie Robertson, an analyst at ANZ said.

"This would be taken as positive for crude in the coming weeks."

Investors are looking out for further indications of monetary stimulus measures in the United States.

 Consumer prices there were flat in July for a second straight month and the year-on-year increase was the smallest in more than 1-1/2 years, giving the Federal Reserve room to tackle high unemployment.

Meanwhile, U.S. oil is expected to break resistance at 95.03 dollars and rise towards 96.87 dollars, according to Media technical analyst Wang Tao.



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