Brent crude steady above $107 ahead of Fed outcome

Investors avoided taking big positions ahead of key economic data this week
Workers with Raven Drilling line up pipe while drilling for oil in the Bakken shale formation on July 23, 2013 outside Watford City, North Dakota. North Dakota has been experiencing an oil boom in recent years, due in part to new drilling techniques including hydrolic fracturing and horizontal drilling. In April 2013, The United States Geological Survey released a new study estimating the Bakken formation and surrounding oil fields could yield up to 7.4 billion barrels of oil, doubling their estimate of 2008, which was stated at 3.65 billion barrels of oil. (Getty Images)
By Reuters
Tue 30 Jul 2013 11:17 AM

Brent crude futures hovered above $107 a barrel as investors looked to a Federal Reserve meeting for clues on the outlook for the U.S. monetary stimulus programme that has bolstered demand in the world's No.1 oil consumer.

Investors also avoided taking big positions ahead of key economic data this week including U.S. payroll numbers and manufacturing from China, the world's second largest oil consumer.

Brent crude futures had slipped 15 cents to $107.30 a barrel by 0625 GMT, after falling 0.8 percent last week.

U.S. crude futures fell 21 cents to $104.34, pressured by a recovery in the U.S. dollar. The North Sea benchmark's premium over its U.S. counterpart widened to $2.96.

"Oil prices are pretty stable but there's quite a lot potentially happening this week and I think traders are prepared to wait for the data to start to come," said Ric Spooner, chief market analyst at CMC Markets.

"The market is kind of level but the risk will be to the downside."

The U.S. central bank is expected to issue a statement after its two-day meeting ends on Wednesday. The Bank of England and the European Central Bank hold policy meetings this week as well.

The U.S. payrolls report on Friday is also in focus, as an improving labour market would impact the timing of any tapering in Fed stimulus.

"The quiet session in most commodity markets suggested participants mostly kept to the sidelines ahead of a string of U.S. data and policy meetings this week," ANZ analysts wrote in a note on Tuesday.

Elsewhere, investors fretted that manufacturing surveys later this week might highlight weakness in China.

Activity in China's vast manufacturing sector may have contracted in July for the first time in 10 months, a Reuters poll showed, signalling a protracted slowdown in the world's second-largest economy as demand at home and abroad sags.

U.S. inventory data will also offer clues on the country's oil demand. U.S. commercial crude oil stockpiles likely fell last week for the fifth straight week, a Reuters poll of six analysts showed on Monday.

Losses in oil prices were limited as exports from several suppliers have been curbed in recent weeks.

The North Sea's Forties pipeline has cut pumping rates by about 40,000 barrels per day due to maintenance, trade sources said, tightening supply of the crude that underpins the Brent benchmark.

Assailants attacked an Islamist party office in Tripoli on Monday and a soldier was killed in fighting in Libya's eastern city of Benghazi, officials said, in an escalation of violence following the assassination of a political activist last week.

That prompted U.S. oil company Marathon Oil Corp to study the sale of its stake in a key Libyan oil consortium, Waha.

The Libyan oil minister said that operations at the crude oil export terminals of Es Sider and Ras Lanuf continued as normal, despite protests and strikes.

Also supporting oil prices were expectations that Iraq, OPEC's second-biggest producer, will report an output decline for 2013, its first after two years of robust gains.

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