NEW YORK Brent crude prices fell on Wednesday, while U.S. crude inched up in seesaw trade ahead of a European Central Bank meeting and a U.S. August payrolls report as investors await central bank action in the face of slowing economic growth.
Crude futures pared losses, copper prices rose and European stocks hit session highs on reports that the ECB is ready to drop preferred creditor status on government bonds it buys.
ECB President Mario Draghi is expected to reveal more details of the bond buying plan following Thursday's meeting.
"Uncertainty about the ECB, after Bernanke's speech didn't provide any stimulus announcement, and the U.S. jobs report on Friday, has kept caution in a market that has bulls looking for a reason to push higher," said Gene McGillian, analyst at Tradition Energy.
McGillian and other brokers and traders said the lack of major damage from Hurricane Isaac to U.S. oil facilities and the return of production should lessen the impact of an expected drop in U.S. oil inventories last week.
In addition to weekly oil inventory reports, investors awaited U.S. August nonfarm payrolls data on Friday. A soft jobs report might strengthen the case for a third round of monetary easing, also known as quantitative easing (QE3), from the Federal Reserve at its September meeting.
Brent October crude fell $1.09 to settle at $113.09 a barrel on Wednesday, after dropping as low as $112.73.
U.S. October crude edged up 6 cents to settle at $95.36 a barrel, dropping to $94.26 and then reaching $96.03 in post-settlement trading.
Brent's premium to U.S. crude narrowed to $17.73 a barrel, based on settlements, after reaching $19.68 intraday on Tuesday.
Total Brent trading volume was 13 percent above its 30-day average, while U.S. crude turnover lagged its 30-day average by 5 percent.
U.S. RBOB gasoline futures also seesawed either side of unchanged before settling at $2.9498 a gallon, down 0.08 percent. It fell to $2.9368 but found support ahead of the 200-day moving average of $2.9242.
Heating oil fell nearly 1 percent, but at around $3.11 a gallon, retained a healthy premium to gasoline futures.
The October refined fuels contracts' move into the front-month position puts more focus on distillates ahead of the Northern hemisphere's winter fuel season and with the U.S. summer driving demand now in the rear view mirror.
U.S. retail gasoline demand over the past two weeks leading into the Labor Day holiday edged up 0.1 percent from the year-ago period when Hurricane Irene raked the East Coast and curbed fuel use, MasterCard said in a report.
But the four-week average stayed below the year ago period.
U.S. OIL SUPPLY
Most eastern Louisiana refineries affected by Isaac have restarted production since the storm passed, and producers have continued to restore offshore production.
About 680,749 barrels per day (bpd) of oil production remained offline on Wednesday, according to the U.S. government, just under 50 percent of Gulf of Mexico offshore output.
As of Wednesday, the storm had shut in a total of 11.2 million barrels of oil production since August 25.
With Isaac shutting in production and limiting imports, U.S. crude stocks fell 7.2 million barrels last week, the industry group American Petroleum Institute said on Wednesday, more than the drop of 5.3 million barrels expected in a Reuters survey of analysts ahead of the report. <API/S>
Crude imports dropped 1.7 million bpd last week, the API said, while stocks at the Cushing, Oklahoma, hub rose 58,000 barrels.
Gasoline stockpiles fell 2.3 million barrels and distillate stocks edged lower by only 132,000 barrels, the API said.
U.S. gasoline stocks were expected to be down 3.4 million barrels and distillate stocks were seen down 1.9 million barrels, the Reuters survey of analysts showed.
The Energy Information Administration's report on oil inventories will follow at 11 a.m. EDT (1500 GMT) on Thursday, delayed a day after Monday's U.S. Labor Day holiday.
(Additional reporting by Christopher Johnson in London and Ramya Venugopal in Singapore; Editing by Bob Burgdorfer, Marguerita Choy and David Gregorio)