SINGAPORE: Brent futures held steady above $110 on Thursday on renewed worries of supply disruptions from the Middle East, while an escalating euro zone debt crisis reinforced oil demand growth concerns and capped the gains.
Uncertainty over a bailout for Spain while policymakers still wrangled over Greek's debt highlighted the difficulty Europe is facing in tackling the crisis, weighing on broader markets, from Asian shares, the euro to gold. For oil, support came from comments from Iran about neutralizing all efforts to sabotage its nuclear facilities.
Front-month Brent crude rose 11 cents to $110.15 a barrel by 0315 GMT, partly recouping the previous session's losses, while US oil gained 22 cents to $90.20.
"There is still uncertainty over the euro zone crisis even though policymakers are putting in a lot of effort to deal with it," said Ken Hasegawa, a commodity sales manager with Newedge in Tokyo.
"The geopolitical worries in the Middle East, while have been around for a long, long time, still continue to support prices."
There is about a $20 premium on Brent prices because of the tensions in the Middle East over Iran's disputed nuclear programme, Hasegawa said. Without that, a fair value for the contract is between $80-$90 a barrel, he said.
Iran is under threat of military action from "uncivilized Zionists," a clear reference to Israel, Iranian President Mahmoud Ahmadinejad said in a speech before the UN General Assembly.
He also said that such threats from big powers are designed to force nations into submission.
Based on technicals, Brent is expected to trade between a low of $109 and a high of $111.50 a barrel in the next 24 hours, Hasegawa said. US oil is relatively weaker because it slipped below its 100-day moving average of $90.27 in the previous session. The US contract may fall to Wednesday's low of $89, with a possibility of slipping further to $88.50, with an upside capped at $91.50.
Oil may trade sideways, with Brent staying within a range of $108-113/bbl near-term, analysts at ANZ Bank said in a note.
US STOCKPILES
The US contract is getting additional support from data that showed crude and refined product stockpiles in the world's biggest oil consumer fell unexpectedly last week as crude imports plunged.
Domestic crude stocks fell by 2.45 million barrels to 365.18 million barrels, the Energy Information Administration said, against a forecast increase of 900,000 barrels.
Gasoline inventories fell by 481,000 barrels to 195.83 million barrels, against expectations of an increase of 200,000 barrels. That in part helped the US RBOB gasoline futures jump 11.40 cents, or 3.8 percent.
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