LONDON: Oil climbed towards $92 per barrel on Tuesday as the prospect of a decline in US crude stockpiles offset concern that a meeting of European leaders would fail to resolve the region's debt crisis.
The two-day summit in Brussels later this week will be the 20th time EU leaders have met to sort out a crisis that has spread across Europe since it began in Greece in early 2010.
The appetite for riskier assets is expected to stay low as the debt crisis grinds on in the euro zone, where Cyprus became the fifth country to seek emergency funding for its troubled banks.
Brent crude rose 73 cents to $91.74 a barrel by 0824 GMT after reaching a session high of $92. US crude climbed 27 cents to $79.48.
"Markets appear to be in risk-off mode, pricing in for disappointment ahead of the EU summit," ANZ analysts led by Mark Pervan said in a note.
"We think any progress could result in a commodity market rally, particularly in oil prices."
Oil prices are expected to be underpinned by forecasts for a 700,000-barrel drop in US crude oil stockpiles last week and supply disruptions in Norway and Argentina due to labour strikes.
Worries about production from the Gulf of Mexico due to a storm threat had boosted oil prices in the previous session, but these concerns have eased with Tropical Storm Debby headed away from energy infrastructure in the basin.
AMPLE OIL
Brent crude oil has shed more than 25 percent from its 2012 peak above $128 reached in March as economic uncertainty has dimmed the global demand outlook at a time of ample supplies.
Higher output by OPEC, in particular Saudi Arabia, has also muted the impact of imminent sanctions on Iran oil exports.
EU governments on Monday formally approved an embargo on Iranian oil to start on July 1, dismissing calls by debt-ridden Greece for possible exemptions to help ease its economic crisis.
The impact of the EU sanctions is also being felt in Asia.
South Korea, a major consumer of Iranian crude, has called a halt to imports from July 1 due to a European Union ban on insuring tankers carrying Iranian oil.
The embargo comes as part of a series of measures designed to put pressure on Iran to halt what the United States and others say is a nuclear weapons programme.
Despite OPEC's call to adhere to a production quota, top oil exporter Saudi Arabia is showing no sign of changing its policy of high output in order to support global economic growth.
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