Brent crude eased for a fourth straight session on Tuesday but held above $100 a barrel after dropping below that level on the previous day for the first time in 16 months, with prices supported by hopes of production cuts by Opec.
Continued output from strife-torn countries such as Iraq and Libya and the shale oil boom in the United States have lessened supply side risks, while slowing growth in western economies and China have raised demand concerns, said Tetsu Emori, a commodity fund manager at Japan’s Astmax Co Ltd.
“Oil at below a $100 a barrel is a little bit risky in the current market – $100 per barrel is really a central point for oil countries,” Emori said.
Brent was trading 14 cents lower at $100.06 as of 0330 GMT after ending the previous session 62 cents down. It had earlier on Monday slumped to $99.36, the lowest since May 1, 2013, before rebounding into three-digit territory.
U.S. crude was 28 cents higher at $92.94 after falling 63 cents on Monday when it dropped for the third straight session.
But there was potential for Brent to trade at around $120 per barrel by the end of this year, while U.S. crude could hover around $110-$115 per barrel, on the back of rising winter demand and possible geopolitical concerns, Emori said.
Expectations of production cuts by the Organization of the Petroleum Exporting Countries come as Gulf Arab oil ministers gather on Thursday in Kuwait for an annual meeting which could include discussion about price levels.
Top Opec exporter Saudi Arabia and other Opec countries favour oil at $100 per barrel and prices are under pressure due ample supply even as some Opec delegates saw the lower prices as short-lived.
U.S. oil prices were also supported by a forecast decline in U.S. commercial crude oil and gasoline inventories last week, which raised hopes of improving seasonal demand.
Crude oil stocks fell by 1.5 million barrels in the week to Sept. 5, according to a preliminary Reuters analysts’ survey on Monday.
The poll was released ahead of weekly inventory reports from industry group the American Petroleum Institute (API) on Tuesday and from the U.S. Department of Energy’s Energy Information Administration (EIA) on Wednesday.
Investors were also eyeing developments in the Middle East.
Iraq’s parliament approved a new government headed by Prime Minister Haider al-Abadi on Monday in a move to save Iraq from collapse and in what U.S. Secretary of State John Kerry said was a “major milestone”.
Libya’s oil output has risen to 740,000 barrels per day, the National Oil Corp said on Monday, an increase from 725,000 bpd that has been fuelled by the reopening of several oil export ports.
Elsewhere, the European Union adopted new sanctions on Monday against Russia over the Ukraine crisis, but enforcement will be delayed while an assessment is being done on whether a ceasefire in Ukraine is holding. The measures will target the ability of Russia’s top oil producers to raise capital in Europe.