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Brent Steady Near $103 On Stimulus Fears

Brent Steady Near $103 On Stimulus Fears

Prices are being supported by worries that the political situation will worsen in the Middle East.

Brent futures steadied near $103 a barrel on Thursday, as worries the US Federal Reserve may scale back its stimulus countered the optimism stemming from a huge drop in oil stockpiles in the world’s top consumer.

Riskier assets weakened across the board, including equities and base metals, ahead of a US jobs report due on Friday that will be scoured for indications on the health of the world’s largest economy and what this means for the Fed’s policy.

Brent gained 7 cents to $103.11 a barrel by 0706 GMT. U.S. oil rose 21 cents to $93.95.

“The market direction will depend a lot on what the jobs data shows,” said Victor Shum, vice president of energy consultancy IHS Energy Insight.

“But overall, I am bearish on prices because supplies are ahead of demand.”

Prices are being supported by worries that the political situation will worsen in the Middle East.

The United States said on Wednesday it was “deeply troubled” by Iran’s plans to start a reactor in 2014 that could yield nuclear bomb material, highlighting concerns about the heavy water reactor Tehran is building near the town of Arak.

Tough Western sanctions have already driven Iran’s crude exports to the lowest in decades in May, and Washington may toughen measures aimed at squeezing oil sales further.

STOCKPILES

Oil prices also drew support from a 6.3 million barrels fall in U.S. crude stockpiles. Analysts polled by Reuters had forecast a much smaller 400,000 barrel decline.

Inventories shrank as imports tumbled while gasoline stocks along the East Coast fell with the start of the peak driving season, data from the U.S. Energy Information Administration (EIA) showed.

“Good refining margins present an incentive to run refinery capacity, but current utilisation levels are nonetheless only at the five-year average for this time of year,” analysts at BNP Paribas said in a note.

Brent is expected to test support at $102.49, with a good chance of breaking below this level and falling to $101.82, while US oil has completed a rebound from the Monday low of $91.26 and is expected to revisit this level, according to Reuters technical analyst Wang Tao.

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