Brent crude held steady around $115 a barrel due to a softer dollar and as an unexpected drop in US distillate stocks overshadowed gains in gasoline and crude inventories.
The dollar retreated against the euro and edged down against a basket of currencies , making commodities priced in the greenback more attractive to consumers using other currencies.
The surprise distillates drawdown last week helped ease concerns the rise in gasoline inventories ahead of the summer driving season that begins this weekend is a sign of waning demand. Also supporting the market was fresh violence in Libya and Yemen, raising the spectre once again of further supply disruptions in the region.
“The euro/dollar is the main factor driving prices today for oil and other commodities, and will continue to do so until there is some clear direction on where the dollar is headed," said Ken Hasegawa, a commodity derivatives manager at Newedge Brokerage in Tokyo.
Brent crude for July edged up 7 cents to $115.00 a barrel by 0454 GMT, after rising as much as 54 cents. US crude
The euro was boosted by a report that China and other Asian investors are expected to buy a "strong proportion" of Portuguese bailout bonds when the eurozone's rescue fund starts auctioning them next month.
But the risks surrounding the single currency remain, with Greece fighting to avoid a debt restructuring that could spread to other European economies struggling with gaping fiscal deficits.
US distillate inventories fell 2.04 million barrels to 141 million barrels, its lowest level in April 2009, and well below projections for a 100,000 barrel build, data from the Energy Information Administration showed yesterday.
Gasoline stocks rose by 3.79 million barrels, while crude stocks showed a modest gain of 616,000 barrels.
According to technical charts, Brent is expected to extend gains to $118.43, subject to a break above a resistance at $116.28, while US oil is expected to rise to $104.60 per barrel, said Reuters market analyst Wang Tao.
Analysts were divided over the longer-term direction of oil, as upward revisions of price forecasts by Wall Street banks Goldman Sachs and Morgan Stanley earlier this week deepened the divide between the bulls and the bears to levels unseen since oil prices peaked in 2008.
While bears cited weak demand and ebbing geopolitical risk premiums as reasons for oil to plunge to $75 per barrel, bulls saw it soaring to $140 due to supply shortages and the limited ability of Opec to cushion any new disruption.
The market will also be closely watching US gross domestic product numbers out later today for further signs of recovery in world's biggest energy consumer.
The government is expected to report that the economy grew at a 2.1 per cent annual rate in the first quarter, according to a Reuters survey, rather than the 1.8 per cent pace it estimated last month.
The risk of supply disruptions due to unrest in North Africa and the Middle-East was back in focus, as violence flared in Libya and Yemen overnight.
Analysts said the ongoing tensions in the region have added a $10-$20 security premium to oil prices.
Reuters
