SINGAPORE (Reuters) - Brent crude hovered above $118 a barrel
on Wednesday as investors marked time ahead of the outcome of the
Federal Reserve's policy meeting, with some investors hoping to
hear hints of further monetary easing in the world's top oil
A third round of monetary stimulus, also called QE3, via
bond-buying by the Fed should boost liquidity in markets and lift
appetite for riskier assets like oil. Equities and other
commodities, including copper, were also little changed ahead of
the statement to be released after the central bank's meeting
later in the day.
"We are not expecting drastic changes from the Fed, but we are
hoping to hear hints about QE3," said Ken Hasegawa, a commodity
derivatives manager at Newedge Brokerage.
"Trading will be quiet throughout the day until we get closer
to the end of the meeting."
Brent crude rose 9 cents to $118.25 a barrel by 2:45 a.m. EDT
(0645 GMT), while crude was up 14 cents at $103.69.
Analysts say the central bank will likely show it is slightly
more upbeat on the economy but in little hurry to raise borrowing
Investors wishing for clues into the prospect of a further
monetary easing may be disappointed, they say, with economic
growth just firm enough to weaken the case for more stimulus
through Fed purchases of government or mortgage bonds.
But the latest data was a mixed bag, showing February home
prices rising for the first time in 10 months while a measure of
consumer confidence last month fell more than expected.
"The overall picture for the global economy remains a little
blurry at the moment. We don't have resolution on the debt crisis
in Europe, and in the U.S. we are still trying to digest their
data," said a senior crude trader based in Singapore.
"And for China, well it seems to have stabilised but what is 8
percent in context to a sluggish global economy?"
China's economy, the world's second largest, grew an annual
8.1 percent in the first quarter, its weakest pace in nearly
While China's overall growth remained healthy, the slower rate
has raised concern among investors, especially at a time when the
debt-ridden euro zone's economic slump is deepening and the
economic recovery remains fragile.
Supporting crude, oil inventories in the world's top consumer
fell last week for the first time in five weeks, data from the
American Petroleum Institute (
) showed on Tuesday, against expectations for a build.
Recent gains in oil prices had narrowed Brent's premium over
WTI crude to $14.67. That premium fell as low as $12.99 last
week, the smallest since February.
Crude stockpiles fell by 985,000 barrels in the week to April
20, compared with analyst expectations of a 2.7-million-barrel
Gasoline stocks fell 3.6 million barrels, dropping more
sharply than the expected 900,000 barrels, and distillate
inventories decreased 3.56 million barrels, the API said.
Refinery utilization rose 0.6 percentage points, the API
report showed, just above the forecast for a 0.5 percentage point
The U.S. Energy Information Administration's own stockpiles
report is due later on Wednesday.
Supply disruption concerns linked to key producer Iran
continue to be on investors' radar although tensions between
Tehran and the West seemed to have cooled momentarily.
Iran will meet with the six world powers -- the United States,
Russia, China, German, France and Britain -- in Baghdad on May 23
for nuclear talks.
The West alleges that Iran is developing atomic weapons, but
Iran, which has refused to stop enriching uranium, insists its
nuclear program is for civilian use.
"The risk premium for Iran remains, I don't see that coming
off anytime soon, but the worst case scenario seems less of a
possibility now," said Hasegawa of Newedge Brokerage.
(Editing by Manolo Serapio Jr. and Ed Davies)