US Fed chairman set to hint at more monetary easing that could stoke oil demand
Brent crude futures climbed above $112 per barrel on Friday, on track for a second monthly gain as investors awaited a speech by US Federal Reserve Chairman Ben Bernanke for hints of more monetary easing that could stoke oil demand.
Investors will look for any sign of a third round of quantitative easing from Bernanke's speech in Jackson Hole, Wyoming, due later Friday, with more stimulus expected to weigh on the US dollar and boost dollar-denominated oil.
Brent crude futures had climbed 14 cents to $112.79 per barrel by 849am UAE time, after falling to a session low of $112.36 earlier. US crude inched up three cents to $94.65.
"Oil is probably going to trade sideways today until the Bernanke speech, which will likely provide more of a downside risk as the markets have already priced in a policy easing response," said Natalie Rampono, commodity strategist at ANZ. "The backwardation in oil futures also implies tighter supplies."
A backwardated market is when prompt prices are stronger than prices for forward months.
A possible strike by Norway's oil services workers, upcoming North Sea maintenance and the ongoing dispute over Iran's nuclear programme all continued to threaten oil output and bolster Brent prices.
Geopolitical risks remain as a UN watchdog report is expected to show that Iran has expanded its potential capacity to refine uranium at an underground site by at least 30 percent since May, adding to Western worries over Tehran's nuclear aims.
Language used by some Israeli politicians has fanned speculation that Israel might hit Iran's nuclear sites before the November US presidential vote. Washington has said there is still time for diplomatic pressure to work, but it could be drawn into any war between the two Middle East foes.
But capping oil price gains, Iranian oil shipments have risen slightly in August from the lowest level in more than two decades, contributing to an increase in OPEC crude output that has been mainly driven by exports from Angola and Nigeria.
A Reuters survey indicated that Saudi Arabia and its Gulf Arab allies - the OPEC members most able to boost production at short notice - have not been pumping more this month, despite calls by consumer countries for extra oil to offset prices.
US crude remained steady as Hurricane Isaac, now a much weaker tropical depression, was seen posing no further threat to most energy infrastructure on the US Gulf Coast.
Most oil and gas companies in the US Gulf Coast region on Thursday prepared to gradually restart installations following Hurricane Isaac, while one refinery reported flooding and scrambled to prevent further damage.
Ninety-five percent of oil production and 73 percent of natural gas production in the Gulf of Mexico remained shut, US government figures showed on Thursday. About 936,500 bpd, or 5.5 percent, of total US refining capacity was still idle.
Also contributing bearishness to US oil prices, the White House repeated on Thursday that releasing oil from the Strategic Petroleum Reserve in response to lofty energy prices remained an option but that it had no announcements to make on the topic.
US oil demand was weaker than expected in June as fuel consumption remained tepid compared with a year earlier, the US government said, adding that oil demand in the world's top consumer fell to 18.915 million barrels per day in June, 210,000 bpd less than previously estimated.
A string of weak economic data in Asia also threatened oil demand.
Japan's industrial output unexpectedly fell as factories cut output to key Chinese and European markets while a leading indicator for manufacturing hovered at its lowest in 16 months, in a troubling sign that Japan's broad economy is weakening.
India's GDP growth likely languished around its lowest in three years in the quarter that ended in June, as weak demand in the West hit the country's exports.