Oil steadied around $115 a barrel on Tuesday as investors weighed further stimulus action by the US Federal Reserve against plentiful supplies of oil.
Some analysts believe the central bank will launch a third round of bond-buying due to recent weak US economic data. Additional stimulus would be likely to weaken the dollar and boost the price of dollar-denominated commodities like oil.
But abundant supplies of oil are likely to keep a lid on prices. The Organization of the Petroleum Exporting Countries said its output had risen by 254,000 barrels per day last month, despite the July 1 start of a European Union ban on Iran's oil exports.
And Saudi Oil Minister Ali al-Naimi said on Monday the Kingdom was concerned about climbing oil prices, with Brent rising by more than 25 percent since late June.
“The high oil price is thus coming under fire both from the US, the largest consumer of oil, and from Saudi Arabia, the biggest exporter, which is likely to preclude any increase in prices,” said a Commerzbank in a research note.
“That said, speculation about the announcement of renewed bond purchases at this week's meeting of the Fed should also ensure that prices do not fall.”
Brent crude was trading 25 cents up at $115.06 a barrel by 16:00 SA time, after settling up 56 cents on Monday. US crude was up 55 cents at $97.09.
French bank Societe Generale said in a note it expected base and precious metals prices to outperform oil and grain prices over the rest of the year, with scope for Brent to back down towards $100 over the coming months.
Maintenance in the North Sea, where Brent crude is produced, has cut output this month and lent support to oil prices in the near term, along with the disruptions to US Gulf of Mexico production after Hurricane Isaac.
US crude oil and fuel inventories likely dropped last week, according to a Reuters survey of analysts on Monday, with imports and production having only just begun to recover after the interruption from Isaac.
Market participants were also waiting for weekly petroleum data issued by the American Petroleum Institute at 4:30 p.m. EDT (22:30 SA time). - Reuters