SINGAPORE (Reuters) - Brent crude slipped on Wednesday, but stayed above $100 per barrel as weak global economic data boosted expectations for more monetary policy stimulus, while rising tension over Iran’s nuclear program fed worries about disruptions to supply.
Iran said it had successfully tested medium-range missiles capable of hitting Israel as a response to threats of attack, further stoking tension between Tehran and the West, and increasing the risk premium on oil prices.
Brent crude had slipped 35 cents to $100.33 per barrel by 2.37 a.m. EDT, after jumping more than 3 percent in the previous session on short-covering before the U.S. Independence Day holiday on Wednesday.
U.S. crude fell 59 cents to $87.07 after settling on Tuesday at its highest close since May 30.
“Oil prices are being supported by expectations of monetary stimulus from central banks, coinciding with concerns of supply disruptions from Iran,” said Natalie Robertson, an analyst with ANZ Bank.
There was a risk of Iran blocking tankers in the Strait of Hormuz, she added.
Iran has previously threatened to block the waterway, through which more than a third of the world’s sea-borne oil trade passes, in response to increasingly harsh sanctions by the United States and its allies aimed at forcing it to curb its nuclear research program.
The Islamic Republic announced the “Great Prophet 7” missile exercise on Sunday after a European embargo against Iranian crude oil purchases took full effect following another fruitless round of world power talks with Tehran.
Risk assets such as commodities and stocks have also been supported by hopes for more monetary stimulus to boost slowing economic growth.
China’s services firms grew at their slowest rate in 10 months in June, easing back from May’s 19-month peak, bolstering expectations that Beijing will deliver further measures to drive growth.
The European Central Bank is expected to cut its main refinancing rate to a record low below 1 percent at its policy meeting on Thursday. Investors are also hoping for action from the U.S. Federal Reserve.
Deutsche Bank and Societe Generale have lowered their 2013 Brent price outlooks, however, on expectations of weak demand due to the gloomy economic climate.
“We believe that the euro zone crisis, the U.S. fiscal cliff, and the possibility of a hard landing in China will give markets plenty to worry about and will keep risk appetite low and constrained,” Societe Generale said on Wednesday.
Technical charts point to a downward movement for oil prices in the third quarter of the year, with Brent to drop to $71.37 per barrel for that period, Reuters analyst Wang Tao predicted.
“I don’t think the economy will be growing and there is plenty of supply, so barring any disruption of supply because of Iran, the upside will be limited,” said Ken Hasegawa, a commodity sales manager at Newedge Japan.
U.S. crude oil stocks fell more than expected last week, according to data released by industry group the American Petroleum Institute, helping to support prices. <API/S>
Crude inventories tumbled by 3 million barrels in the week to June 29, well above the 1.9-million-barrel drawdown forecast by analysts, with Gulf Coast stocks off nearly 4.3 million barrels.
Wednesday’s U.S. holiday pushes back the U.S. Energy Information Administrations inventory data to 11 a.m. EDT on Thursday.
Also supporting prices, Norwegian trade unions put off a decision to escalate a strike by offshore oil and gas workers until Friday, extending their battle with employers to nearly two weeks.
Editing by Clarence Fernandez and Joseph Radford