Brent crude eased back after hitting a five-week high above 109 dollars a barrel on Monday as investors bet the U.S. central bank would maintain stimulus measures to support demand.
The new head of the Federal Reserve, Janet Yellen, delivers her first testimonies to Congress this week and markets expect her to indicate monetary policy will stay loose.
Economists assume Yellen will say gradual tapering of asset buying is likely as long as the economy continues to improve.
This view was reinforced on Friday by disappointing U.S. employment data, showing job creation slowing to its weakest in three years and suggesting U.S. economic growth may be losing momentum.
“Oil has spiked up on expectations that tapering of asset buying will not be accelerated,” Commerzbank head of commodities research Eugen Weinberg said.
But Weinberg said oil could be close to the top of its range for a while.
Presently, U.S. crude futures are edging up towards 100 dollars per barrel and North Sea Brent is not far below 110 dollars.
Both contracts jumped more than two dollars on Friday, but eased on Monday.
March Brent crude fell 60 cents to 108.97 dollars a barrel, down from a session high of 109.75 dollars, its loftiest since Jan. 2.
U.S. crude was down 50 cents at 99.38 dollars, after rising to 100.46 dollars, a 2014 high.
Brent could be supported by tighter North Sea supply this year as Britain’s biggest oilfield, Buzzard, undergoes a total nine weeks of maintenance in 2014.
Chinese economic data this week could also be supportive if it shows faster growth in the world’s second-biggest oil user.
“The overall picture of the economy remains one coming out of recession and quite clearly in recovery mode,” CMC Markets chief strategist Michael McCarthy said.
But analysts are wary after the recent run-up in oil prices.
“We are striking resistances on both charts,” McCarthy said. “I suspect that’s containing the exuberance in the market.”
An easing of geopolitical tensions over Iran’s nuclear programme could also weigh on oil prices.
Oil supply from the OPEC producer may rise if Tehran reaches a final deal with world powers.
Iran has agreed to start addressing suspicions that it may have worked on designing an atomic weapon, the U.N. nuclear agency said on Sunday.
Iran and six world powers are due on Feb. 18 to start a final round of talks aimed at reaching a broader diplomatic settlement with the Islamic state
Reuters
