NEW YORK Brent oil futures rose on Wednesday as a German court ruling affirming the legality of the euro zone bailout fund combined with geopolitical concerns to lift oil prices before data showing a rise in U.S. crude stocks curbed gains.
Concerns about geopolitical risk, reinforced after militants killed the U.S. ambassador to Libya, and hopes for more monetary easing by the U.S. Federal Reserve as its two-day policy meeting began on Wednesday provided additional support to oil prices.
"People are looking at the Fed and wondering whether they are really going to do quantitative (monetary) easing or just another form of stimulus," said Mark Waggoner, president at Excel Futures in Bend, Oregon.
Additional stimulus is expected to pressure the U.S. dollar, usually supportive to dollar-denominated commodities like oil.
Brent October crude rose 56 cents to settle at $115.96 a barrel, ahead of the front-month contract's Thursday expiration. Brent's $116.67 peak was the highest since prices reached $117.03 intraday on August 16.
U.S. October crude slipped 16 cents to settle at $97.01 a barrel, after reaching $98.06. It dropped as low as $96.31, below the $96.62 200-day moving average, a technical level closely watched by traders.
Total Brent crude trading volume was brisk, 20 percent above the 30-day average, while U.S. crude turnover lagged its 30-day average by nearly 7 percent.
Brent pared gains and U.S. crude fell after the Energy Information Administration's weekly report showed crude oil inventories rose 1.99 million barrels last week in the United States, against expectations of a 2.6-million barrel draw due to Hurricane Isaac.
"The report is neutral to bearish as the impact of Hurricane Isaac on supplies faded more rapidly than anticipated," said John Kilduff, partner at Again Capital LLC in New York.
Germany's Constitutional Court said the country could ratify the euro zone's rescue fund and budget pact, lifting the euro to a four-month peak against the dollar and boosting oil, before the EIA data put crude prices in retreat.
U.S. RBOB gasoline futures hit an October contract high ahead of the EIA data, then slumped 1 percent after the EIA data showed stockpiles rose in the Northeast, PADD 1, region, which includes the New York Harbor contract delivery point.
Gasoline stocks in the Gulf Coast, PADD 3, region fell 1.393 million barrels last week, the EIA said, as refineries gingerly restarted after Isaac. The drop in Gulf Coast stocks accounted for the bulk of the 1.18-million barrel drop in total U.S. stockpiles.
Analysts and cash market traders said a seasonal move from gasoline to distillate positions, as summer's peak driving demand recedes in the rear view mirror, boosted U.S. heating oil nearly 1 percent even though distillate stockpiles rose last week.
MIDDLE EAST VIOLENCE, TURMOIL
Concerns about potential supply disruptions in the Middle East continue to support oil futures as the West's dispute with Iran over Tehran's nuclear program drags on.
Israel's frustration over a perceived lack of U.S. response to the threat of Iran acquiring nuclear weapons spilled into public this week and the danger throughout the region was brought in focus by news the U.S. ambassador to Libya and three other embassy staff were killed by militants.
IEA MONTHLY REPORT
Global oil demand is likely to be muted through 2013 as high prices, a sluggish economy and improved energy efficiency hems in the growth rate, allowing for a "more comfortable" inventory picture, the International Energy Agency said in a monthly report.
The IEA made no significant changes to its global oil demand outlook and forecasted demand growth at a steady rate of around 0.8 million barrels per day (bpd) or 0.9 percent in both 2012 and 2013.
Some analysts said the oil demand outlook would probably be marked down by the IEA in the future.
"With prices this high, it's going to be an issue for developed and emerging markets where governments will need to adjust domestic prices. This is not factored into the report yet. They tend to revise demand lower much later," said Olivier Jakob, at Petromatrix in Zug, Switzerland.
(Additional reporting by Simon Falush and Jon Hopkins in London and Osamu Tsukimori in Tokyo; editing by John Wallace, Marguerita Choy and David Gregorio)