Oil Slips towards $124 on Fed Comments, Saudi Supply.Summary: U.S. crude stocks up 7.8 mln barrels, far above forecast; At least 7 North Sea Forties cargoes delayed
Oil prices dipped towards $124 a barrel on Wednesday on worries demand for crude could be curtailed after the U.S. central bank dashed hopes of further economic stimulus and news Saudi Arabia Saudi Arabia (sä`dē ərā`bēə, sou`–, sô–), officially Kingdom of Saudi Arabia, kingdom (2005 est. pop. would likely keep output high in the event of a stock release.
Industry data showing a larger-than-expected rise in crude inventories in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , the world's top oil consumer, also pressured prices, but losses were capped by further disruption in exports from the North Sea.
Brent crude Brent Crude is one of the major classifications of oil consisting of Brent Crude, Brent Sweet Light Crude, Oseberg and Forties. Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum. futures fell by 40 cents to $124.46 a barrel by 0940 GMT (Greenwich Mean Time) See UTC.
GMT - Universal Time 1 , after earlier touching a low of $124.23.
U.S. crude futures lost 79 cents to $103.22, after falling by more than $1 in the previous session.
Oil prices have been volatile this week in thin volumes, analysts said, with Brent rallying by two percent on Monday alone but falling by nearly 1 percent the next day.
"We expect yet another jittery trading session today as volumes remain light with both benchmarks stuck below this week's highs," said Andrey Kryuchenkov at VTB VTB Vneshtorgbank (Russia foreign trade bank)
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Minutes from the Federal Reserve policymakers' meeting in March released overnight revealed reduced appetite for further quantitative easing amid timid improvements in the U.S. economy.
"QE has had a clear effect on some of the commodity markets over the last few years," said the head of Natixis' commodity research Nic Brown.
Between the Fed's announcement of a second round of quantitative easing in November 2010 until its end in June 2011, Brent futures rallied by around 35 percent.
"It's no surprise that with the Fed dampening hopes of QE, gold is down this morning. Its effect on oil markets has been less pervasive but still important," Brown added.
In the absence of further money printing, the U.S. dollar index inched up. A stronger dollar can render greenback denominated commodities such as gold and oil more expensive to other currency holders.
In Europe, eyes were on auctions from struggling southern euro zone members, with Spain targeting a bond issue of around 3.5 billion euros ($4.65 billion), while Portugal looked to issue its longest-dated debt since it took a bailout.
"The outcome could be a good indicator of market sentiment Market Sentiment
The feeling or tone of a market (i.e. crowd psychology). It is shown by the activity and price movement of the securities.
For example, rising prices would indicate a bullish market sentiment. : it could be a sign of whether the market believes if the sovereign debt crisis is over or not, and could impact risk appetite or aversion," said Commerzbank's Carsten Fritsch.
Oil prices were also pressured after industry sources said Saudi Arabia was likely to maintain high oil production if consumer countries released strategic oil reserves, but would not seek to lure buyers for more oil by discounting its crude.
"We look at what the Saudis are doing and believe they're genuine in their effort to bring prices back down from recent highs," Natixis' Brown said. "They made a tactical mistake in 2011 in not appreciating that IEA IEA International Energy Agency
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IEA International Ergonomics Association (International Energy Agency) countries would release stocks, and this time around they're ensuring they're the arbiter."
Overnight in the United States, data from industry group American Petroleum Institute (API) showed crude oil inventories in the country rose by 7.8 million barrels in the week to March 30, a much larger increase than expected.
The U.S. Energy Information Administration's crude inventory report is due out later on Wednesday.
Despite the drive to flush more oil into the market, actual and potential disruptions continue to put a floor under prices, with at least seven cargoes of North Sea Forties crude loading in April being delayed following production problems.
A ban on European insurance cover for Iranian oil exports from July 1 is also threatening to curtail shipments and raise costs for major buyers. Japan and South Korea have lobbied for exemptions, but insurance and shipping executives say a complete ban now looks likely. (Additional reporting by Francis Kan in Singapore; editing by James Jukwey
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