SINGAPORE/LONDON (Reuters) - Brent crude dipped on Thursday due to slack demand while prices were supported around $100 by signs Europe would find a way to deal with Spain’s banking crisis and the United States might embark on monetary stimulus.
Brent crude was down 71 cents to $99.93 a barrel by 0856 GMT, having hit a low of $99.62 as it gave up part of its $1.80 rise a day earlier. U.S. crude was trading 30 cents down at $84.71.
Volume was modest for both contracts ahead of U.S. Fed Chairman Ben Bernanke testifying before Congress later on Thursday.
Oil lagged other risky assets such as both Asian and European equity markets rose.
Crude inventories in the United States, the world’s second largest energy consumer, fell last week after 10 straight weeks of stock build, but the drop was smaller than analysts’ expectations. Fuel demand over the past four weeks declined by 2 percent from a year earlier.
“The price of oil has rebounded well from its June 1 lows. However, the price increase is just a flow-through effect of the risk-on mentality from investors,” Miguel Audencial, sales trader at CMC Markets, said in a report.
“Stockpiles are still at high levels and I can’t see it trading above $90 in the near term unless there is an indication that demand will significantly increase,” he said, referring to U.S. crude prices.
Brent fell below $100 for the first time since October on Friday, and prices are down more than 20 percent from the 2012 high of $128.40 posted in March.
U.S. crude has recovered from a nadir of $81.21 touched on Monday, its lowest intraday price since October 6. The contract is about 23 percent below its 2012 high of $110.55, also struck in March.
Some experts, however, see potential for a rebound in oil prices.
“There are expectations of further monetary easing from the United States and that is making people come back,” said Tetsu Emori, a Tokyo-based commodities fund manager at Astmax Investments.
“There are many, many factors still out there. There is Greece, there is Europe. All this will keep oil very choppy for the time being.”
In a speech in Boston on Wednesday, Janet Yellen, the vice chair of the U.S. Federal Reserve, cited risks to the economy from ongoing housing problems, a weak jobs market and worsening financial conditions, with her comments suggesting to some that the Fed may be close to easing policy again.
Across the Atlantic, Germany and European Union officials were urgently exploring ways to rescue Spain’s debt-stricken banks.
Spain, the euro zone’s fourth-biggest economy, said it was effectively losing access to credit markets due to prohibitive borrowing costs and appealed to European partners to help revive its banks.
Oil is supported by lingering worries about supply disruption from the Middle East over Iran’s nuclear program. The Islamic Republic questioned world powers’ readiness for negotiations over its program and accused the U.N. watchdog of behaving like a Western-manipulated intelligence agency, keeping up its sparring ahead of talks in Moscow.
Iranian crude exports to Europe will dry out after July 1, when an EU embargo goes into effect.
“Iran could provide the upward pressure on oil prices and the downturn would weaken prices,” energy strategist Daniel Yergin, chairman of IHS CERA, told Reuters. “We have seen tremendous volatility as the oil market waits for central bankers to come back to the rescue.”
Goldman Sachs said the global oil market has been tightening up after falling into supply surplus earlier in the second quarter due to an increase in output by Saudi Arabia ahead of the EU embargo on Iranian oil.
“The market has shifted from surplus to balanced on a seasonally adjusted basis, and we expect the oil market will move into a seasonally adjusted deficit as sanctions go into effect and world oil demand begins its seasonal rise, drawing inventory and requiring higher prices,” Goldman Sachs said in a research note.
Reporting by Manash Goswami in Singapore and Ikuko Kurahone in London; editing by Jason Neely