Brent crude held steady above $120 today as a weaker dollar helped recoup losses made earlier in the day, while comments from the US Federal Reserve and the European Central Bank eased worries about growth in oil demand.
The Fed said the US economy expanded modestly in January through mid-February as hiring picked up a bit across several districts. Across the Atlantic, comments by a European Central Bank official on keeping a bond-buying programme as an option to help Spain eased worries about the region's fiscal woes.
Brent crude rose 31 cents to $120.49 a barrel by 7.23am, after touching a low of $119.93 earlier in the session. US oil rose 37 cents to $103.07, adding to $1.68 gains in the previous session. The dollar weakened 0.25 per cent against a basket of currencies.
"The overall expectation is that Europe would be able to manage this crisis," said Tetsu Emori, a Tokyo-based commodities fund manager at Astmax Investments. "The ECB has measures that it can take. If you look at Greece, all its problems may not be over, but the region is taking measures to tackle them."
Investors have been worried about oil demand growth after a recent spate of weak numbers from the United State and China - two of the world's top economies - that suggest the health of the global economy may be worse than expected.
The worries were echoed by Janet Yellen, the number two official of the US central bank, who said yesterday the Federal Reserve's ultra-easy monetary policy is appropriate given high unemployment and the headwinds facing the economy.
Still, the comments from Yellen and two other top US Federal Reserve officials suggest the central bank is on hold as it waits to see whether a modest recovery will accelerate despite some stumbles, or whether more monetary stimulus, also known as quantitative easing, will be needed.
The central bank's Beige Book released yesterday had much the same cautiously upbeat tone as the previous report, and pointed to some improvement even in the battered housing sector.
"The release of the Beige book reiterated the Fed's view that the US economy is growing at a modest-to-moderate pace," Miguel Audencial, sales trader at CMC Markets, said in a report.
"In other words: 'Do not expect a third round of quantitative easing anytime soon'."
Oil investors are also awaiting the upcoming nuclear talks this weekend between Iran and world powers after Tehran said it would present new proposals in it.
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. But it was unclear if Tehran was willing to address its disputed uranium enrichment drive as six world powers want.
Oil reversed two days of losses yesterday 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, dwarfing 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.
"The official crude inventories were significantly lower than private industry figures, perhaps alleviating some of the downside risk," analysts at ANZ said in a report.
Reuters
