SINGAPORE: Brent crude was steady above $110 on Wednesday, as investors turned cautious ahead of a European summit to deal with the region's debt crisis and the release of key Chinese economic data later this week.
Market participants hope recent credit warnings by Standard & Poor's will drive European leaders to take more decisive action at Friday's summit. These expectations also pushed up Asian equities and gold prices.
Brent crude fell 14 cents to $110.67 a barrel by 0329 GMT, after settling Tuesday $1 higher at $110.81 a barrel. US crude edged up 21 cents to $101.49 a barrel.
"The market is likely to stay cautious before the ECB rate decision and the EU summit on Friday. Investors have priced in a positive outcome at the summit, so we might see a sell-off if the meeting disappoints," said Natalie Robertson, a commodities analyst with ANZ Bank in Melbourne.
Expectations of an interest rate cut by the European Central Bank (ECB) when it meets on Thursday have risen after statistics agency Eurostat confirmed estimates pointing to weakening growth, also aiding oil futures.
A sharper than expected fall in US crude stocks failed to boost oil prices, as the bullish data was offset by larger than projected builds in gasoline and distillate inventories, industry data showed on Tuesday.
A clearer picture of US stocks will emerge when the US Energy Information Administration announces its weekly report later on Wednesday.
CHINA WATCH, IRAN RISK
The market also awaits over the coming week the release of Chinese economic data likely to show further signs of cooling in the world's second-biggest oil consumer in November.
Inflation is also expected to have eased sharply, giving Beijing more room to focus on growth and consider further policy easing after cutting banks' reserve requirement ratios last week for the first time in three years.
China will face a "severe export situation" in 2012 and will try to export more to emerging markets then, a commerce ministry official said on Wednesday.
The key events in Europe this week have overshadowed tension between Iran and the West over the Middle Eastern nation's nuclear program and the prospect of a supply disruption from the world's fifth-largest oil exporter.
"There's been a lot of talk about the Iran situation and the impact on prices but that's going to take a back seat to Europe this week," said Robertson.
However, the threat of shipments being disrupted remains, with EU Energy Commissioner Guenther Oettinger saying on Tuesday European Union states have a consensus on the need for a ban on Iranian oil exports to the bloc.
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