Oil fell toward $48 Wednesday after weak U.S. economic data sparked a bout of profit-taking overnight, outweighing escalating tensions in the Middle East and widening supply cuts from Russia's gas row with Ukraine.
The market will be watching for weekly inventory data from the U.S. energy department due later Wednesday, which are forecast to show a jump in stockpiles, and U.S. December employment data, to be released Friday.
"The EIA weekly inventory numbers and the U.S. unemployment data will be key for near-term price direction," said Jim Ritterbusch, president of Ritterbusch & Associates.
"If we see any surprises from the EIA stats, it's likely to be bearish rather than bullish."
U.S. crude for February delivery was down 27 cents a barrel at $48.31 by 0846 GMT (5:46 a.m. EST), while London Brent was down 3 cents at
$50.50.
Data released Tuesday showed that pending sales of U.S. homes dropped in November to their lowest level in at least seven years and that the country's services sector shrank for the third consecutive month in December.
A U.S. Energy Information Administration report due later is likely to show fuel stocks rising as demand slows, with crude oil stocks seen up 900,000 barrels last week, and distillates and gasoline supplies also expected to have increased.
Further clues about future demand from the world's largest oil consumer will come when U.S. Labor Department unveils December non-farm payroll and unemployment data Friday.
ON THE UP
Oil prices have risen nearly 50 percent since a low of $32.40 reached on December 19, boosted by worries over supply disruptions from Israel's deepening incursion into Gaza, Russia's gas row with Ukraine, and mounting evidence of OPEC's compliance with production cuts.
Israel and Hamas studied a proposal by Egypt for a ceasefire in the Gaza Strip Wednesday that won immediate backing from the United States and Europe.
While the conflict does not directly threaten any oil supplies, unrest in the Middle East can bolster prices because countries in the region pump about a third of the world's oil.
Also adding support was Russia's deepening dispute with Ukraine over natural gas prices, which triggered supply disruptions to parts of Europe. This echoed a similar spat three years ago that raised questions about Russia's reliability as an energy exporter.
Evidence of OPEC members implementing their biggest ever output cuts also grew Tuesday as Kuwait and Iran told customers of bigger supply curbs this month in a bid to prop up prices.
The producer group has cut output three times since September in a bid to halt the market's slide.
