Brent crude rose on Tuesday, staying above US$103 per barrel on hopes of more policy steps by central banks to stimulate global economic growth ahead of US Federal Reserve Chairman Ben Bernanke's testimony.
Bernanke will present his semi-annual monetary policy report to Congress later in the day and on Wednesday against a backdrop of lacklustre growth at home and a worsening debt in Europe. His peers at central banks in China, the euro zone and Britain have already eased monetary policy to prop up their economies.
Brent crude rose 19 cents to US$103.56 a barrel by 0259 GMT. The contract rose to as much as US$103.74, the highest since late May. US crude gained 19 cents to US$88.62 after settling US$1.33 a barrel higher.
"The market focus is on further monetary easing measures," said Ken Hasegawa, a commodity sales manager at Newedge Japan. "If the global economy is slowing, we can expect oil demand growth to slow down as well."
Hasegawa expects the two benchmarks to trade in a tight range over the next 24 hours, with Brent staying between US$102 and US$104 a barrel and the upside for the US benchmark capped at US$90 and a floor set at US$86.
Weak US retail sales and a lower International Monetary Fund global growth forecast revived hopes the Fed will announce more stimulus, pushing the dollar index down 0.16 percent, which partly aided the rise in oil prices.
In a mid-year health check of the world economy, the IMF said emerging market nations, long a global bright spot, were being dragged down by the economic turmoil in Europe and warned the global outlook could dim further if policymakers in the euro zone do not act with enough force and speed to quell the crisis.
US retail sales fell in June for the third straight month, the longest run of consecutive drops since 2008 when the country was mired in recession, adding to evidence the world's largest economy was slowing.
Brent oil is expected to hover around US$102.43, the neckline of a possible inverted head-and-shoulders, while US oil will gain more to US$89.50 per barrel, driven by a wave (c), according to Reuters technical analyst Wang Tao.
Despite the backdrop of a weakening economic outlook, oil prices have risen in the past sessions partly due to worries over a supply disruption from the Middle East.
Brent has slipped 20 percent from the highs for the year touched in March due to worries about demand growth, but the contract has found a floor because of simmering tensions over Iran's disputed nuclear programme.
US Navy vessel off the UAE fired on a fishing boat that failed to heed warnings, killing one and injuring three. That pushed oil higher on Monday, serving as yet another reminder of how quickly a confrontation can turn deadly in the Gulf.
US Secretary of State Hillary Clinton said on Monday the US and Israel were "on the same page" in their determination to prevent Iran from achieving what the West fears is its goal of building a nuclear bomb.
World power and Iran have had several rounds of talks to resolve the standoff, but have so far failed to secure a breakthrough.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.