LONDON — Brent crude oil steadied above $111 a barrel on Wednesday, supported by buoyant stock markets which gained on positive economic news from the US.
Investors awaited US data on factory orders and an employment report to confirm expectations of a revival in demand growth following upbeat economic data from the US and China.
Signs of a strengthening US economy and continued support from the Federal Reserve pushed European stock indices to their highest level since the 2008 financial crisis on Wednesday.
"Oil is in a wait-and-see mode for the economic data to confirm the really good numbers we had," said Harry Tchilinguirian, oil strategist at BNP Paribas in London.
Brent crude futures slipped 22c to $111.39 a barrel by 12.22pm GMT, off an earlier high of $112.23. US light crude oil lost 19c to $90.63.
Analysts looked for US economic data to affect oil. Ahead of an employment report in the private sector from ADP, economists in a Reuters survey expected that 170,000 jobs were created in February versus 192,000 new jobs in January.
"The Fed’s plan of action is highly dependent on meeting economic objectives. If the ADP report shows a positive change but not too much, that means the Fed will continue with asset buying," Mr Tchilinguirian said.
Economists polled by Reuters expected US factory orders for January to fall 2.2% compared with a 1.8% rise in the prior month.
"We have now two solid support levels on oil.... Now that we have that floor, we just need something to allow it to bounce off," Mr Tchilinguirian said.
‘Positive tone’
A surge in US and European equities was driven, in part, by data showing the US services sector accelerated to its fastest pace in a year in February, helped by a rise in new orders and demand for exports.
"The positive tone was supported by ongoing policy support and solid economic data from the US and Europe," analysts at ANZ said in a report. "The US ISM nonmanufacturing index surprised on the upside at 56 in February, suggesting strong growth in this part of the US economy that is a big employer."
The oil market is also watching developments in Venezuela, following the death of President Hugo Chavez after a two-year battle with cancer. Investors are on the lookout for a succession plan in the Organisation of Petroleum Exporting Countries (Opec) nation.
The country’s oil industry was operating normally and no disruption was expected, state oil company PDVSA said.
"His death is not likely to have any major impact on the oil market," Tetsu Emori of Astmax Investments said. "But investors are waiting and watching."
Brent is expected to keep rising to $113.22 a barrel, as it has cleared a resistance at $111.83, while a rebound target at $91.40 remains unchanged for US oil, according to Reuters technical analyst Wang Tao.
Yet gains were capped by medium-term concerns such as rising US crude supply and the country’s fiscal crisis, which have pushed Brent down about $8 a barrel since a high of $119.17 touched in mid-February.
Weekly US inventory data released by the American Petroleum Institute showed a steep build of 5.6-million barrels in domestic crude stockpiles for the week to March 1, including a 259,000-barrel build at the Cushing, Oklahoma, delivery point for the US oil contract.
Product stockpiles fell slightly more than analysts’ expectations, however. Traders will now be watching for weekly stockpile data from the US Energy Information Administration, due out on Wednesday, for further insight into inventories.
