SINGAPORE: Brent crude hovered at $114 a barrel on Wednesday after posting six days of gains on expectations the United States will act again to try to stimulate its economy and boost fuel demand.
Investors also eyed storm developments for potential supply disruption in the United States and a pick-up in seasonal fourth quarter demand, although a larger-than-expected rise in crude inventories depressed US oil futures.
Brent crude was down 5 cents at $113.97 by 0218 GMT, after settling at a four-week high of $114.02 a barrel. US crude fell 39 cents to $88.51 a barrel, snapping four days of gains.
US crude is headed for its biggest monthly loss since May while Brent is on track for its largest loss since June, as fears that another recession in the United States and a debt crisis in the euro zone could cut fuel demand sparked a sell-off at the start of August.
US crude's discount against Brent crude was at $25.46, slightly wider than Tuesday's close, as a force majeure on Nigerian Bonny Light tightened supply of Brent-linked grades.
"Investors are already looking at fourth quarter demand which doesn't look so bad from a seasonal standpoint," said Tony Nunan, a risk manager at Mitsubishi Corp.
"If we can get beyond the fear of a second recession, the oil market still stands a chance for upside."
Minutes from an August Fed meeting showed it was considering a range of actions to help the struggling economy, including the unprecedented step of tying the interest rate policy outlook to a specific unemployment level.
"There's no way that the Fed could have another round of quantitative easing, but the financial community seems to have a strong expectation," Nunan said.
Federal Reserves chairman Ben Bernanke, by delaying the September meeting, could be "leaving the door open" to assess more data on housing and unemployment, he added.
Jonathan Barratt, managing director of Commodity Broking Services in Sydney, said the need for additional stimulus was a debatable issue.
"I am of the opinion that they will do nothing. The United States could suffer in terms of growth but it will not be a detrimental issue," he said. "The market needs to work itself to the right level."
Technical charts showed that Brent and US crude are heading for further gains, Reuters market analyst Wang Tao said.
INVENTORIES RISE
An industry report showed a higher than expected rise in US crude oil inventories last week as imports rose and refinery utilization dropped, while gasoline saw a big draw.
Crude stockpiles rose 5.1 million barrels for the week to Aug. 26, data from the American Petroleum Institute showed, well over analyst expectations for a 400,000-barrel gain. The government's Energy Information Administration will issue its own data on Wednesday at 10:30 a.m. EDT.
Investors were eyeing the development of Tropical Storm Katia in the Atlantic, which could become a hurricane by late Wednesday or early Thursday, according to the National Hurricane Center.
A tropical wave over the northwestern Caribbean Sea has a 10 percent chance of becoming a cyclone in the next 48 hours, and could move into the western Gulf of Mexico, home to a large concentration of oil and natural gas facilities.
In Libya, oil production can restart within weeks and reach full pre-war output within 15 months, the newly-appointed chairman of the country's National Oil Corporation (NOC) said.
The resumption of Libyan production was supposed to weaken Brent prices but this has been balanced by the Bonny Light force majeure and an embargo on Syrian exports, Mitsubishi's Nunan said.
Copyright Reuters, 2011
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