LONDON: Brent crude oil fell towards $105 per barrel on Thursday on disappointment that neither the US Federal Reserve nor the European Central Bank had offered concrete new steps to boost economic growth.
ECB President Mario Draghi had been widely expected to announce new measures to try to stabilise the euro after promising last week to do whatever it takes to protect it.
But the ECB left its benchmark interest rate unchanged and Draghi largely repeated previous bank policy at his monthly news conference, leaving open the possibility of future action but providing no surprises.
The US Federal Reserve dashed market hopes on Wednesday by deferring any fresh monetary stimulus for the world's biggest economy, although it kept the door open for further bond buying, also known as quantitative easing (QE).
Another round of QE would be likely to support asset prices and could push up commodities and oil.
"This is the anticipated disappointment after the unreasonable hype," said Daniel Briesemann, commodities analyst at Commerzbank in Frankfurt. "I think commodities markets will end down today unless there is something very unexpected."
Ioan Smith, strategist at Knight Capital in London said Draghi's statement was "quite disappointing as ... expected:
"The majority of the market was expecting a lot more. There is a lack of any action so he has basically passed the buck back on to politicians. He hasn't come up with anything that the majority in the market had hoped for."
Brent futures for September rose $1.21 to a high of $107.17 but then fell back sharply to trade around $105.60 by 1325 GMT. U.S crude fell $1.20 to $87.71.
SUPPORTIVE FUNDAMENTALS
Oil prices drew support from several fundamental factors.
A US Energy Information Administration (EIA) report showed on Wednesday a drop of 6.5 million barrels in domestic crude oil inventories last week, the largest weekly drawdown since December and far more than the 700,000-barrel drawdown forecast in a Reuters poll.
Maintenance work in the British sector of the North Sea will cut output in September of grades which make up the Brent benchmark for international trade and support prices. News of the supply cuts has helped boost Brent's premium over US crude to around $18, its highest since May 16.
The US Congress overwhelmingly passed a new package of sanctions against Iran on Wednesday that aims to punish banks, insurance companies and shippers that help Tehran sell its oil.
The bill now heads to the White House for President Barack Obama's signature. The United States, European Union, and other Western nations are trying to stop Iran's suspected pursuit of nuclear weapons, while Iran says its nuclear programme is for peaceful purposes.
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