LONDON: Brent crude oil steadied around $120 per barrel on Thursday, supported by a weaker dollar and hopes of faster economic growth, despite news of higher oil production by Saudi Arabia and a fairly bearish report from the IEA energy advisory body.
The dollar slipped against a basket of currencies on expectations of looser monetary policy after disappointing US jobs data last week, easing pressure on commodities which are mostly priced in the US currency.
But the oil market is looking increasingly well supplied as Middle East output rises and fuel demand across the industrialised and developing economies is weaker than expected.
The International Energy Agency, which advises 28 industrialised nations on energy policy, said in its monthly report the oil market could be turning the corner after more than two years of tightening as global oil inventories rose.
"The cycle of repeatedly tightening fundamentals since 2009 has been broken for now," the IEA report said.
ICE Brent futures rose 10 cents to $120.28 a barrel by 0936 GMT, after touching a low of $119.93 earlier in the session. US oil was up 30 cents at $103.00. The dollar weakened 0.2 percent against a basket of currencies.
Oil industry analysts and traders said prices were being underpinned by fears of supply disruptions if tensions between Iran and the West erupted into confrontation. Hopes of strong global economic growth were also supportive.
"Economic growth in China and geopolitical risks over Iran and Syria are helping to keep up prices," said Christopher Bellew, senior oil broker at Jefferies Bache in London.
IRAN TALKS
Oil investors are awaiting talks this weekend between Iran and the big world powers after Tehran said it would present new proposals which might help resolve the dispute over its nuclear plans. The United States and its allies say Iran wants to make an atomic bomb, something the Islamic Republic denies.
The offer for new proposals was made by head of Iran's Supreme National Security Council, Saeed Jalili, according to the country's English-language Press TV. It was unclear if Tehran was willing to address its disputed uranium enrichment drive as six world powers want.
Previous rounds of talks with the five UN Security Council members - the United States, Britain, France, Russia and China, plus Germany - foundered in part because of Iran's refusal to discuss the scope of its uranium enrichment.
The IEA said Iran was producing less oil now than last year thanks to a tough oil embargo imposed by Washington and the European Union.
But oil markets were well supplied, the IEA said, adding that global oil stocks may have built by as much as 1 million barrels per day (bpd) during the first quarter of this year.
Saudi Arabia was producing around 10 million bpd in March, the IEA said, 1 million bpd higher than a year earlier.
Saudi Oil Minister Ali al-Naimi confirmed to reporters on Thursday that Saudi Arabia had risen to that level in April.
"Oil supply is plentiful," Naimi said on a visit to South Korea. "There is no shortage."
Oil reversed two days of losses on Wednesday to settle up 30 cents, as data from the Energy Information Administration showed US gasoline stocks dropped 4.3 million barrels last week and distillate stocks, which include heating oil and diesel fuel, slid 4.0 million barrels -- both much above forecasts.
That overshadowed the 2.8 million-barrel build in US crude stocks, their third straight weekly gain, beating analysts' forecasts for an increase of 2.1 million barrels. Even so, the rise came in well below industry data that showed a 6.6-million-barrel increase.