Brent hovers near 10-week high, Fed meeting in focus

By Luke Pachymuthu

SINGAPORE (Reuters) - Brent crude futures were barely changed around $105, holding not far off their strongest level in 10 weeks, as investors were cautious ahead of a U.S. Federal Reserve meeting.

The Fed, whose two-day policy meeting starts on Tuesday, is under pressure to roll back some of its $85 billion in monthly bond purchases after advances in the U.S. economy. Its three quantitative-easing schemes have buoyed prices of commodities.

At 0632 GMT, Brent was up 13 cents at $105.60 a barrel. It rose to 106.67 on Monday, the highest since April 4, on mounting tensions in the Middle East. U.S. oil dipped 3 cents to $97.74 after hitting a nine-month high near $99 a barrel in the previous session.

"What I'm expecting is some indication of a slow, measured tapering of the bond-purchase programme by the Fed. It will cause some impact to markets at the start but I'm looking for minimal slippage at least for oil prices," said Carl Larry, president of Houston-based Oil Outlooks and Opinions.

"In general any decision to taper would signal confidence in the ongoing recovery of the U.S. economy, that is potentially an upside for markets depending on how investors take it."

Global financial markets have been on edge since Fed Chairman Ben Bernanke suggested the central bank would be looking to taper its stimulus if the economy showed signs of improvement.

The oil market is also keeping an eye on a standoff over the civil war in Syria as world leaders lined up to pressure Russian President Vladimir Putin into toning down his support for Syrian President Bashar al-Assad on the second day of a G8 summit.

Although Syria is not key to global oil supply, investors are worried the civil war there could affect other countries in the Middle East and plunge the whole region into conflict

Stung by recent victories for Assad's forces and their support from Hezbollah guerrillas, the United States said last week it would step up military aid to the rebels, including automatic weapons, light mortars and rocket-propelled grenades.

Any run-up on geopolitical risk would soon bump into a fundamental situation of ample supply and uncertain demand.

"The market has certainly built in a risk premium into prices, and this should keep it supported despite fundamentals suggesting that there is more than enough oil out there to buffer a disruption to any kind of supply from the region," said Larry of Oil Outlooks and Opinions.

"But until we see some clear consensus between the likes of Russia and the U.S. we shouldn't expect to see an end in sight in Syria and that keeps the risk of the conflict spilling over and drawing in other regional entities much higher."

U.S. commercial crude oil stocks likely fell last week due to lower imports, according to a preliminary Reuters poll done on Monday.

Source: http://news.yahoo.com/brent-hovers-near-10-week-high-fed-meeting-065814575.html

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