Brent crude steadied on Wednesday, holding just below a nine-month high near $119 per barrel on forecasts of a faster-than-expected growth in global oil demand this year, although easing tensions in Iran subdued prices.The US Energy Information Administration (EIA) and the 12-member Organization of the Petroleum Exporting Countries increased their outlook for world oil consumption growth, citing increasing signs of a recovery in the global economy.
According to Reuters, investors have also been taking cues from the currency markets ahead of a meeting of G20 finance ministers and central bankers this week amid increasing international tensions over the euro's strength and the yen's weakness.
"The faster demand forecasts are supporting oil prices, but the concerns of a currency war are weighing on the markets," the news wire quoted Philips Futures senior commodity analyst Ker Chung Yang as saying in Singapore.
Front month Brent futures shed 6 cents to trade at $118.60 per barrel by Wednesday morning. It touched a high of $118.75 earlier in the session, around 40 cents away from a nine-month high of $119.17 hit last week.
US crude rose 6 cents to $97.57 per barrel.
Trading volumes were lower as China, Taiwan and Hong Kong remained closed for the third day this week.
According to the Opecs monthly report, consumption of oil is expected to expand by 840,000 barrels per day this year - 80,000 bpd more than previously expected.
Due to higher demand, and little change in supply expectations from producers outside the group, Opec expected demand for its crude to average 29.78 million bpd in 2013, up 130,000 bpd from the previous estimate.
The EIA followed suit and increased its forecast for demand growth by 110,000 bpd to 1.05 million bpd in 2013, taking global demand to 90.2 million bpd this year, adding to evidence of global demand surpassing expectations in early 2013.
US crude inventory may have risen last week as refineries head into maintenance in the world's biggest oil consumer, but an expected cut in imports may negate the impact in coming weeks.
A Reuters poll also showed crude stocks may have risen 2.4 million barrels in the week to 8 February.
Prices may get a boost after euro zone industrial output data and US retail sales data are released later in the day, the news wire said.
The oil markets also got some relief from easing tensions between Iran and the US, which had been keeping prices elevated in recent months.
Iran acknowledged that it was converting some of its higher-grade enriched uranium into reactor fuel, which is one way for the Middle Eastern nation to slow the growth in its stockpile of material that could be used to make a bomb.
Iran's production of higher-grade uranium has been a concern for major powers because it is only a short technical step away from the 90% purity needed for a weapon.
Closer to home for Asian investors was a nuclear test by North Korea, which could escalate tensions, especially after the US and China came down strongly on the Asian nation.
North Korea said the test had "greater explosive force" than those it conducted in 2006 and 2009.
According to its KCNA news agency, it had used a "miniaturised" and lighter nuclear device, indicating it had again used plutonium, which is suitable for use as a missile warhead.
By Upstream Online
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