Oil prices steadied around $76 per barrel today as investors weighed a sharp drop in U.S. consumer sentiment against early signs of improving oil demand.
Analysts said oil prices were moving in a range around $75 per barrel with ample support due to large drawdowns in U.S. crude oil inventories over the past three weeks.
U.S. crude for August delivery fell 1 cent to $76.00 per barrel by 1225 GMT. The contract settled down 61 cents at $76.01 a barrel on Friday, closing the week almost unchanged.
London Brent crude lost 2 cents to $75.35.
Oil prices initially rose as much as $2 last week, supported by good U.S. corporate earnings, a fall in U.S. crude stockpiles and an upward revision in global oil demand forecasts.
But investors who believed the world economy is on shaky ground got ammunition on Friday after U.S. data showed consumer prices fell for a third month in June while consumer sentiment dropped to a near one-year low.
"The net change in the last week was a rather insignificant 8 cents per barrel, illustrating just how difficult it has been for any trend to get established," said Edward Meir, senior commodity analyst at brokers MF Global, said in a client note.
FUNDS ON THE SIDELINES
"Part of the explanation behind this inconclusive pattern seems to be that fund money remains on the sidelines," Meir said, adding that although exchange data showed a modest uptick in net long exposure this past week, "the overall long-side bias remains minimal and not that firmly committed."
Implied volatility for U.S. crude has fallen to about 30 percent over the last month as prices have stabilised around $75 per barrel, which is in the middle of the price range preferred by many oil producers and consumer governments.
Technical analysts who look at price charts see strong support for August U.S. crude futures from the 50-day morning average (MA), now at $74.31, and solid overhead resistance at the 200-day MA, $3 higher at $77.51.
"The oil market is within a fairly well defined range," said Eugen Weinberg, head of commodities research at Commerzbank. "We are getting support from equity markets and also a bit from the weakness of the dollar against the euro."
The IMF and European Union suspended a review of Hungary's funding programme that deepened euro zone worries, as the country will not have access to funds in its $25.1 billion loan package until the review is concluded.
European stocks strengthened a little today, while the U.S. dollar index was flat against a basket of currencies as investors wound back on riskier assets. The euro was up 0.2 percent against the dollar.
China closed the Dalian Xingang oil port in northeast China, home to the country's largest oil reserve bases, after crude pipeline explosions spilled oil into the sea, an industry executive said today.
State oil major PetroChina, which operates two refineries in Dalian, has started trimming refinery operations to cope with one week's closure of the main oil port. As many as six Very Large Crude Carriers, or 12 million barrels of crude oil, are set to be diverted from the port.