Brent crude fell around $1 today ahead of closely watched US non-farm payrolls data, as investors booked some profits after data from the previous session lifted confidence on the global economy and pushed Brent up nearly $5.
ICE Brent crude was down 67 cents at $117.92 a barrel by 1004 GMT after they fell to the day's low of $117.06. US crude was at $98.16 a barrel, down 51 cents.
Oil prices are still headed for their second straight weekly gain, with Brent poised to rise around 5 per cent this week. Brent is up some 24 per cent this year.
Brent posted its biggest percentage daily gain in two months yesterday, hitting a three-week high as US data on jobless claims and retail sales came in stronger than expected.
That prompted several economists to raise forecasts for the government's non-farm payrolls count due later today.
"The payroll numbers are absolutely key," Amrita Sen, analyst at Barclays Capital said. "Oil fell back in May because macro data was weak because of the effects of the earthquake in Japan, but we'd expect to see that rebound in July and August."
She added that today's retreat was partially down to profit taking after the sharp rise the previous day.
Barclays Capital raised its Brent crude forecast on Tuesday by $10 to $115 for 2012, though it left its 2011 forecast unchanged at $112. JP Morgan, Goldman Sachs and Morgan Stanley have also issued bullish notes on the outlook for oil prices this week.
Oil prices have rebounded about 10 percent after plunging to four-month lows following the International Energy Agency's (IEA) shock announcement on June 23rd that member nations would release 60 million barrels of oil reserves.
The IEA said it would consider later this month whether to release more reserves, but does not see the program extending for longer than a month or two.
JP Morgan said in a report that the timing of the IEA release threw a spotlight on tightness in global oil supply.
"Politics aside, the main reason we can see for the precise timing of the IEA stock release was that it coincided with clear indications from tanker traffic data that OPEC output would fall short of prior pledges," the bank said in a report yesterday.
"As such, it is difficult to conclude anything except that there is little or no spare capacity in the oil market."
China, a major oil consumer, this week raised interest rates for the third time this year in a bid to tame rising inflation, raising hopes the government's monetary tightening cycle may be nearing its end.
The country's annual inflation in June is expected to hit a near three-year peak of 6.3 per cent, according to a Reuters poll of 28 economists.
China's central bank governor Zhou Xiaochuan said today the country's monetary policy needed to support economic growth and keep inflation under control.
US inventory data helped to keep a lid on prices.
Crude inventories fell 889,000 barrels to 358.6 million barrels in the week to July 1st, below average forecasts of a 2.3 million barrel drawdown, US Energy Information Administration data showed yesterday.
However, gasoline stocks unexpectedly fell 634,000 barrels to 212.5 million barrels, versus analyst projections for a 100,000-barrel build.
Distillates, which include heating oil and diesel, likewise posted a surprise 191,000-barrel fall to 142.05 million barrels, compared with a forecast rise of 700,000 barrels.
Reuters
