Brent futures held steady above $109 a barrel on Wednesday on expectations of steady growth in global oil consumption, with a surprise fall in stockpiles in the world's top oil consumer, the United States, providing additional support.
The Dow Jones Industrial Average closed at yet another record to mark eighth days of straight gains and the broader commodities market rose for a fourth day as investors took on more risk on hopes of a steady global recovery. Added support for oil came as the producer group OPEC left unchanged its consumption growth forecast for 2013.
Brent crude slipped 3 cents to $109.62 a barrel by 0309 GMT, after rising to $109.80 earlier in the session. US oil increased 25 cents to $92.79, gaining for a fifth day in the longest daily winning streak since mid-December.
"Downside risks for oil seem to be very limited. If you look at equities and other markets, there is no reason to sell crude," said Tetsu Emori, a commodities fund manager at Astmax Investments in Tokyo. "I think oil prices have bottomed out and, overall, we will see a recovery."
Emori expects Brent to rise to $111 to 112 a barrel in the next few days, with WTI touching $94 to $95.
The Organization of the Petroleum Exporting Countries in a monthly report left its forecast for growth in global oil consumption unchanged for now, still expecting an expansion of 840,000 barrels per day (bpd) this year. But it warned demand growth could miss forecasts due to economic weakness and U.S. supply would hit its highest in three decades.
OPEC, the source of more than a third of the world's oil, expects the U.S. economy to expand by 1.7 percent in 2013, down from the 1.8 percent previously thought. Growth in the euro zone is now seen contracting by 0.2 percent, having earlier been expected to expand slightly.
A similar monthly report by the US Energy Information Administration (EIA) cut its 2013 world oil demand forecast slightly, but also cut the forecast for non-OPEC output.
Uncertainty over Europe's economic outlook, worries about central banks pulling the plug on easy monetary policy and concerns of an uneven recovery in China have shaved more than $10 a barrel off Brent since the high of more than $119 touched by the contract in February.
But positive data out of the United States, assurances by the U.S. Federal Reserve of continuing with its easy policy and lingering worries of supply disruption from the Middle East may help push prices higher.
"The two reports have focused a lot on Europe and are worried about the negative impact it may have on oil," Emori said. "But if you look at supply disruption worries, equity markets, oil should remain supported."
Brent remains neutral in a range of $109.14 to $111.33 per barrel, while US oil is expected to test resistance at $93.72, according to Reuters technical analyst Wang Tao.
Oil, particularly the US benchmark, was supported by a report from the American Petroleum Institute (API) that showed U.S. crude inventories fell 1.4 million barrels last week compared with expectations of a rise of 2.3 million barrels, according to a Reuters poll. Crude stocks at Cushing, Oklahoma, dropped 597,000 barrels, gasoline inventories fell 3.1 million and distillates declined 2.2 million barrels.
Traders will now be watching for weekly stockpile data from the US Energy Information Administration, due out on Wednesday, for further insight into inventories.
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