LONDON: Brent crude rose over $103 a barrel on Tuesday as bullish U.S. consumer data overshadowed the effect of persistent supply pressure and weak economic data in most countries that are major users.
The benchmark is headed for a second straight monthly decline in August as slow growth in China and Europe has curbed oil demand and led to a supply glut in the Atlantic Basin, offsetting the impact on prices from world political tensions.
Brent crude rose 68 cents to $103.33 a barrel by 1406 GMT, adding to a gain of 36 cents the previous day. U.S. crude, or West Texas Intermediate (WTI), gained 88 cents to $94.23 a barrel, after rising $1 to $94.35 a barrel on Monday.
The U.S. consumer confidence index rose to its highest level since October 2007, indicating Americans are increasingly confident about the economic outlook.
Investors, meanwhile, have unwound a global political risk premium in Brent, discounting the possibility of supply disruption despite conflicts in Iraq, Libya and Ukraine.
"The Brent price appears to be bottoming out at $102 per barrel following its pronounced slide in recent weeks, speculative financial investors having now largely exited the market," Commerzbank wrote in a daily commodities note.
On Monday, hedge funds and other big speculators cut their bets on rising Brent crude oil prices to the lowest level in just over two years.
Barclays analysts said in a note that oil output was picking up from OPEC countries most likely to face supply bottlenecks such as Iran, Libya, Iraq and Nigeria.
Disrupted supply from these countries totalled less than 400,000 barrels per day in July, down from 1.6 million bpd in September last year, they said.
Libya's oil production has been increasing in the past few weeks despite a split between an Islamist faction in Tripoli and the newly elected parliament, following air strikes attributed to Egypt and the United Arab Emirates.
"Libya is still a key input for prices. As it stands in the spot market, if we see more out of Es Sider, that will put more pressure on prices," Olivier Jakob of Petromatrix Consultancy in Switzerland said.
Adding to rising supplies, Iraqi Kurdistan has already managed to deliver four large cargoes since May, despite Baghdad's efforts to block sales even as violence worsens in Iraq.
But a further flare-up of tensions in Libya, Iraq and the Ukraine could erase recent price losses.
Libya's ambassador to Egypt, Mohamed Jibril, called on Monday for foreign assistance to protect its institutions, airports and natural resources.
In Syria, the United States was preparing military options to pressure Islamic State militants.
In Minsk, talks between Russia and Ukraine could suffer a setback after Ukraine released footage of Russian soldiers being captured.
Brent's premium to U.S. crude hit the widest in more than two months on Monday following a pipeline oil flow switch that will send more crude to the WTI delivery point in Cushing, Oklahoma.
Investors will scour weekly U.S. oil inventory data due on Tuesday and Wednesday, which could shed more light on supply and demand in the world's largest oil consumer.
U.S. commercial crude oil inventories are forecast to have increased 1.8 million barrels in the week to Aug. 22, while refined product stockpiles fell, a preliminary Reuters survey of four analysts showed on Monday.
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