Brent slips below $104, Fed offers no signal on stimulus
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Brent crude slipped below US$104 a barrel on Wednesday, snapping five days of gains as Federal Reserve Chairman Ben Bernanke offered no signs of further monetary stimulus to boost growth in the world's top oil consumer.
Oil also slipped as a 16 percent increase in prices from the lows for the year touched last month prompted some investors to book profits. Broader markets, from Asian shares to the euro, edged higher as Bernanke in his testimony to the Senate Banking Committee left the door open for more stimulus.
Brent crude slipped 72 cents to US$103.28 a barrel by 0534 GMT, after settling 63 cents higher. US oil slipped 58 cents to US$88.64 a barrel after ending up 79 cents.
Bernanke said the Fed stands ready to offer more stimulus as needed but stopped short of signaling action in the near term. He also said recovery was being held back by anxiety over Europe's debt crisis and expressed unease over a stagnant jobs market.
Investors are now awaiting data on crude stockpiles in the United States due later in the day from the Energy Information Administration (EIA) to confirm an industry report that inventories have fallen more than expected.
Crude inventories fell by 2m barrels in the week to July 13, gasoline stocks fell by 116,000 barrels and distillate stocks rose by a sharp 3.4m barrels, data from the American Petroleum Institute showed.
A Reuters poll of 10 analysts forecast a 1.2m barrel drop in domestic crude inventories. Gasoline inventories were forecast up 1.2m barrels, on average, while distillate stocks were projected to rise 1.5m barrels.
"Seasonality appears to be a positive influence with draw-downs on high US crude oil stocks, to fuel the peak of the US driving season, encouraging buying," analysts at ANZ said in a note.
Brent will retrace into a range of US$101.24-US$102.07 per barrel, as suggested by its wave pattern and the RSI indicator, while US oil faces resistance at US$89.50 per barrel and may revisit its Tuesday low of US$87.41, according to Reuters technical analyst Wang Tao.
Further declines in the dollar may also support oil, Spooner said. The greenback has been under pressure on expectations the Federal Reserve would go for a third round of bond purchases, or quantitative easing, to support the economy. Any weakness in the currency could boost dollar-denominated commodities.
"The Fed hasn't explicitly talked about another stimulus, nevertheless, there is an easing bias," Spooner said.
Worries about supply disruption from the Middle East due to simmering tensions over Iran's disputed nuclear programme are also supporting prices.
Iran said it would insure any foreign ships that enter its waters, in an effort to skirt a European Union ban on insuring ships carrying Iranian crude that has hampered the country's oil exports.
The EU enacted a ban on July 1 on insurance for tankers carrying Iranian oil, preventing EU insurers and reinsurers from covering tankers carrying Iran's crude anywhere in the world.
Latest data on China's home prices may help provide a floor on oil as the numbers showed a break from eight straight months of decline, in a tentative sign pro-growth policies are gaining traction in the world's second-biggest oil consumer.