NEW YORK (Reuters) - Brent oil prices edged higher in choppy trading on Wednesday, but U.S. prices slipped as traders weighed expectations for the eventual return of Libyan oil exports against a surprise dip in crude inventories in the United States.
The U.S. Energy Information Administration (EIA) said crude stocks in the world’s largest oil consumer fell by 2.2 million barrels last week, surprising forecasters who had expected a 800,000 barrel rise. Both gasoline and distillate stocks rose, however, which limited gains in crude prices.
Brent crude settled 84 cents higher at $110.15 a barrel, after hitting a high of $111.00. U.S. crude closed at $85.16, down 28 cents on the day, having earlier hit a high of $86.59.
“The EIA data was supportive but not that bullish, so you just saw some profit taking late for (U.S.) crude,” said Dan Flynn, analyst at PFGBest Research, adding that developments in Libya were making it harder to sustain rallies.
Libyan rebel authorities in their eastern stronghold of Benghazi have called on oil workers to return immediately to the Ras Lanuf and Brega oil terminals after rebels fighters wrenched control of them from Muammar Gaddafi forces earlier this week.
Prices drew support a force majeure declared on Tuesday by Royal Dutch Shell (RDSa.L) on some supplies of Nigerian sweet crude that some European refiners have been using to replace the 1.6 million barrels per day of Libyan output lost since February.
Financial markets are waiting for a speech from U.S. Federal Reserve Chairman Ben Bernanke on Friday, to see if the central bank chief signals further monetary easing to stimulate a sluggish U.S. economy.
“The market’s not taking off, and I think it’s going to be real hard for us to put on any big positions anywhere when we have this big looming meeting” of central bankers in Jackson Hole, Wyoming, said Richard Ilczyszyn, senior market strategist at MF Global in Chicago.
“If we do get something perceived as positive, and equities fly up, you could see U.S. crude run back up to the $90 price band.”
Volumes were relatively low, with the number of U.S. crude contracts changing hands about a third lower than the average over the past 30 days. Brent volumes were in line with the 30-day average.
Sunoco Inc (SUN.N) said a crude distillation unit at its 335,000 barrel per day (bpd) Philadelphia refinery was running at reduced rates following a fire at the plant. This helped support gasoline and heating oil prices in the United States.
Traders said financial markets also were watching a sharp correction in gold prices. Views were split as to whether this would weigh on commodities as an asset class or indicated that investors might be preparing to move into riskier assets.
Gold hit a record $1,911.46 an ounce on Tuesday but has since fallen by around $150 or 8 percent, one of the largest corrections on record.
U.S. data showed stronger-than-expected U.S. durable goods orders, and the U.S. Congressional Budget Office predicted a decline in the deficit in coming years as a result of the government’s recent debt-reduction agreement.
Equity markets edged up 1.3 percent while the U.S. dollar index .DXY rose against a basket of currencies.
A stronger dollar tends to weigh on oil and other commodities priced in the greenback while oil traders have been looking to equity markets for guidance on the strength of the economic recovery.
The S&P 500 index is down by about 13 percent since the end of July, while Brent crude oil has slipped by about 6 percent over the same period.
In Libya, rebels moved to consolidate their position in the capital, Tripoli, and offered a $1.3 million bounty for Muammar Gaddafi.
Libya’s rebel government will honor all energy contracts granted legally under Gaddafi’s 42-year rule, rebel reconstruction leader Ahmed Jehani said on Monday, adding they aimed to restore oil output to pre-war levels within a year.
A Reuters survey of oil industry analysts and officials last month suggested Libyan oil production could bounce back to 1 million bpd within months of the end of Gaddafi’s rule.
Reporting by David Sheppard, with additional reporting by Jessica Donati in London and Seng Li Peng in Singapore; Editing by Marguerita Choy