(Reuters) - Brent crude edged down on Wednesday after rallying for six straight sessions, but prices continued to hover near $109 per barrel supported by Iran's threat to halt oil shipments through the Strait of Hormuz and positive U.S. data.
Brent fell 37 cents to $108.90 barrel by 0826 GMT, after climbing more than a dollar in the previous session. Prices have surged over 5 percent since December 16. U.S. crude eased 5 cents to $101.29 a barrel.
"The U.S. is ending the year so far on a rather upbeat note, which is good for oil," said John Vautrain, a director at energy consulting firm Purvin & Gertz.
Improving labor market conditions lifted U.S. consumer confidence to an eight month high in December, while data from last week showed new orders for U.S. durable goods soared in November and new home sales hit a seven-month high.
"Generally, when economic news is more positive, the same sort of things that drive the stock market higher would also drive oil prices. Whether that sticks in the New Year remains to be seen," Vautrain said.
Iran's first vice-president warned on Tuesday that the flow of oil through the Strait of Hormuz would be stopped if foreign sanctions were imposed on Iran's crude exports over its nuclear ambitions.
The remarks coincided with a 10-day Iranian naval exercise in the Strait and nearby waters, a show of military force that began on Saturday.
"I'm a long-term bull and what we are seeing is justification as to why you want to be in for the long term," said Greg Smith, executive director of Global Commodities Ltd.
"The issues are not going to be resolved quickly as to how supplies are going to be managed if we impose sanctions on Iran."
Most of the crude exported from Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq - together with nearly all the liquefied natural gas from lead exporter Qatar - must slip through the Strait of Hormuz, a 4-mile wide shipping channel between Oman and Iran.
About a third of all sea-borne oil was shipped through the Strait in 2009, according to the U.S. Energy Information Administration, and U.S. warships patrol the area to ensure safe passage.
The U.S. State Department said it saw "an element of bluster" in the threat.
Top oil exporter Saudi Arabia and other Gulf OPEC states stood ready to replace Iranian oil if further sanctions halted Iranian crude exports, industry sources said.
US STOCKS DATA MAY SUPPORT PRICES
Oil prices could find further support from the release of weekly U.S. crude stocks data on Wednesday and Thursday.
Domestic crude oil inventories are expected to have fallen for a seventh straight week as refiners delayed imports to draw down stockpiles for year-end tax considerations, a Reuters poll ahead of weekly supply data showed on Tuesday.
The American Petroleum Institute will publish its weekly report at 2130 GMT on Wednesday, while data from the U.S. Energy Information Administration will be released on Thursday.
Crude trading volumes remained reduced in the holiday week, with Brent volume on Tuesday 76 percent below the 30-day average.
