Brent rises as Greece passes vote

SINGAPORE: Brent crude edged higher on Wednesday after five sessions of losses, as Greece's embattled government survived a confidence vote critical to avoid a debt default and ahead of the outcome of a key US Federal Reserve meeting.

The US crude benchmark slipped after an industry report showed crude stocks in the world's top oil consumer fell less than expected, raising concerns rising prices are hurting demand, and as the dollar gained.

Brent crude for August increased 7 cents to $111.04 a barrel by 0645 GMT, after rising to as much as $111.37. US oil slipped as low as $93.31 a barrel, and was down 44 cents at $93.73 a barrel.

The market will be looking to the Fed for clues about its handling of the faltering economic recovery. In Europe, the International Monetary Fund's warning about risks to Spain added to concerns about the euro zone.

The market will be looking to the Fed for clues about its handling of the faltering economic recovery. In Europe, the International Monetary Fund's warning about risks to Spain added to concerns about the euro zone.

"People are worried about the world's economic recovery. We are just squeaking by from one hurdle to another."

The Federal Reserve is likely to acknowledge renewed weakness in the US economy in a post-meeting policy statement on Wednesday, but may not take any action.

"We are going to see cautious trading take place ahead of the release of the Fed's statement," said Serene Lim, an oil analyst at ANZ in Singapore.

"The market will be watching for any shift, any change in the tone, any change in the words."

Oil stocks fell by a small 81,000 barrels last week as refinery utilization rose, American Petroleum Institute data showed. Analysts had expected a drop of 1.4 million barrels in crude stocks for the week to June 17.

US Independence Day holiday travel will fall 2.5 percent from a year ago as expensive gasoline eats into driving demand, travel group AAA forecast on Wednesday.

OUT OF SYNC

Brent and US futures may continue to trade 'out of sync' if data expected later in the day from the Department of Energy shows a build in crude and gasoline stocks in the United States, Nunan at Mitsubishi said.

The premium of Brent crude futures over US benchmark West Texas Intermediate has jumped more than 50 percent since the start of June, reaching a massive $21 a barrel.

Brent also strengthened because more North Sea Forties crude oil cargoes have been delayed in July due to work on offshore oil platforms and infrastructure, trade sources said.

A sell off in the spread between Brent crude and US oil futures on Tuesday narrowed the London grade's premium to below $17 a barrel for the first time since June 9 as West Texas Intermediate staged a late session rally to end higher.

"The spread is way too wide," Nunan said. "The two contracts will come back and trade in tandem."

EURO ZONE

Stock markets from the US to South Korea gained after Prime Minister George Papandreou won the vote, with the Nasdaq posting its biggest percentage gain since October on Tuesday, while the S&P 500 marked its best day in two months.

Still, after clearing its confidence vote, the Greek government now faces a more arduous task of passing an austerity plan in order to secure a new bailout from the European Union and IMF.

Spain faces considerable risks to its recovery and must deepen and conclude reform work to allay market concerns, the International Monetary Fund said on Tuesday.

The euro ran into profit-taking on Wednesday after the Greek government won the vote.

Copyright Reuters, 2011