Oct 23, 2012, 04.18 PM IST
Brent futures slipped for a sixth day on Tuesday on worries over oil demand growth due to an uncertain global economic outlook, but stayed above USD 109 a barrel with simmering tensions in the Middle East helping stem the slide.
Global growth fears revived after the world's largest maker of tractors and excavators Caterpillar Inc.
Brent crude had slipped 19 cents to USD 109.25 a barrel by 0612 GMT, just off the three-week intraday low of USD 109.12 touched in the previous session.
"People can't seem to get their heads around the global growth outlook," said Jonathan Barratt, chief executive of Barratt's Bulletin, a Sydney-based commodity research firm. "There is no clear indication on how the global economic growth issue will be tackled by policymakers."
Barratt expects oil to continue trading in a tight range until election results in the United States, the world's top oil consumer, and there is further clarity on the government's policies and budget.
Earlier in the day, oil futures rose to as much as USD 109.80 a barrel as investors judged the previous session's fall as an opportunity to buy. Asian shares, the euro and base metals had all recovered.
"(Markets saw) a moderate risk-on mood in the Asia Pacific," said Ric Spooner, chief market analyst at CMC Markets in Sydney.
"(We saw) a bit of anticipatory confidence about China basing out and on the green shoots in the United States. Equities were up and looked like that was flowing through to the oil market."
At least seven people were killed and dozens wounded in gunbattles in the Lebanese capital Beirut and coastal Tripoli on Monday. The clashes have heightened fears that Syria's civil war with its sectarian dimensions is now spreading into Lebanon, and may spread further across the region.
Supply worries worsened after police in Kuwait used teargas, stun grenades and baton charges to disperse tens of thousands of demonstrators protesting changes to the electoral law which the opposition has called a constitutional coup by the government.
Oil prices were also supported after Germany's finance ministry wrote in its monthly report that the economy likely grew in the third quarter despite a weak global backdrop thanks to a strong performance by the country's industry and robust exports to areas outside the euro zone.
Many economists had forecast the economy would contract in the third quarter, particularly as Germany's closely-watched Ifo business sentiment index worsened for five months in succession.
WEIGHING ON PRICES
Prices are also under pressure from expectations US oil inventories likely rose for the third straight week as imports recovered, a preliminary Reuters poll of analysts showed.
Crude inventories were expected to have risen 1.7 million barrels for the week ended October 19. All seven analysts saw a build in stockpiles. In the previous week, domestic oil stocks rose 2.9 million barrels to 369.2 million barrels, data from the Energy Information Administration (EIA) showed.
Brent may revisit its October 3 low of USD 107.67 as it has cleared support at $109.68, while US oil is expected to retest support at USD 88.19, with a good chance of breaking that and falling more to USD 86.69, said Reuters technical analyst Wang Tao.
Investors are likely to stay on the sidelines until the outcome of the US Federal Reserve's two-day meeting that kicks off on Tuesday is known. The central bank is likely to hold off from taking fresh steps, opting to review the impact of the significant action it took last month and keep a low profile in its last gathering before the November 6 election.
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