Brent oil edges up in choppy trade ahead of Irene

Brent crude oil rose slightly in choppy trade on Friday as traders weighed the approach of Hurricane Irene toward refineries on the US Northeast coast against concern about the health of the US econonmy.

US Federal Reserve Chairman Ben Bernanke gave a speech on the ailing US economy that mentioned no new stimulus measures, which pressured oil prices. But traders noted concerns Hurricane Irene could disrupt gasoline and diesel supplies.

At 11:40 am EDT, Brent crude futures were up 10 cents at USD 110.72 a barrel. US light crude futures were down 36 cents at USD 84.94 a barrel, having fallen by more than USD 2 a barrel.

The Fed chairman, delivering a speech to central bankers in Jackson Hole, Wyoming, said it was clear, "the recovery from the crisis has been much less robust than we had hoped." But he did not announce any new stimulus measures even though a US government report revised second quarter economic growth lower on Friday.

"People are beginning to digest the data; is the economy slowing? Is demand for oil going to be that low?" said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut.

At last year's Jackson Hole meeting, Bernanke hinted at what eventually became a USD 600 billion quantitative easing bond-buying programme that many said help support the economy but also boosted the price of many commodities, stoking inflaiton.

Some price support came from Hurricane Irene as it barrelled towards US East Coast refineries, posing a potential threat to supply; while the ongoing conflict in OPEC member Libya and international pressure on Syria also underpinned sentiment.

But worries about the outlook of the faltering recovery remained high on the agenda. Deutsche Bank joined a growing chorus of banks in downgrading oil price forecasts, trimming its Brent forecast for 2011 to USD 112 a barrel from USD 114 a barrel and US light crude to USD 94 a barrel from USD 100.

"We now believe that the economy is likely to grow more slowly in 2011-2012," Deutsche Bank's Adam Sieminski said in a note.

A Reuters poll of analysts meanwhile showed that oil prices are likely to stay above USD 100 a barrel next year despite increasing downward pressure from the expected return of some Libyan production and fears of a double-dip recession.

Euro zone, hurricane

Economic worries on the other side of the Atlantic also kept investors on edge. The Spanish economy grew at a slower pace in the second quarter than the first, fuelling concerns Spain could slip back into recession if the euro zone economy continued to worsen.

German consumer sentiment fell slightly going into September, hitting a 10-month low as the euro zone debt crisis and fears of another recession in Europe and the United States weighed on consumer expectations, a survey showed.

Hurricane Irene, a Category 3 storm that lashed the low-lying Bahamas on Thursday, was expected to hit North Carolina on Saturday before heading up the coast to New York and beyond.

MF Global said in its daily report that it expected refineries in the path of the hurricane to withstand the winds from the storm and not shut down for now.

While the East Coast region has no major offshore oil and gas production like the hurricane-prone Gulf Coast, the stakes are still high.

The region has around a dozen nuclear plants and a massive oil delivery hub at New York Harbor. Its pipelines and power networks serve more than 100 million Americans.

"The biggest issue may be flooding if the storm surge brings water up into New York Harbor. The harbor imports 400 kb/d in gasoline," the MF Global report said.