LONDON: Brent crude oil prices slipped toward $109 a barrel on Wednesday as investors booked profits from a recent rally but concerns over Middle East supply disruptions and a reduction in US oil stockpiles supported prices.
Brent was down 34 cents at $109.3 at 1444 GMT. US oil briefly turned positive in choppy trade after the US stockpiles data was released but later fell by a dollar to hover below $106 a barrel.
Oil prices also shrugged off earlier data suggesting the euro zone's longest ever recession was over, with analysts saying that still-sluggish growth figures and cuts in throughput at European refineries pointed to weak demand.
"I think it is at these levels that Brent will run out of steam," said Christopher Bellew, oil trader at Jefferies Bache.
"The September contract is about to expire and...there has been a great deal of speculative length."
Brent oil futures for September delivery had risen for a third straight session on Tuesday, touching their highest in nearly two weeks at $110.06 a barrel as investors fretted that unrest and maintenance would continue to disrupt supply in Libya and Iraq.
Brent had risen back above its 200-day moving average on Monday at $108.17, a technical marker watched by traders. The contract also fully breached its short-term 10- and 15-day moving averages on Tuesday.
BoA Merrill Lynch said on Wednesday that sustained disruptions in Libya could temporarily push oil above $120.
"Many supply disruptions may not clear and structural supply problems in the North Sea, Libya, or Iraq could lend support to a prolonged period of backwardation in Brent," it said in a weekly research note.
"Brent could temporarily spike back to this year's highs of $120/bbl if Libyan output does not promptly bounce back above 1 million barrels per day."
Libya's deputy oil minister said on Wednesday that production had fallen to 600,000 barrels a day due to field problems while Ras Lanuf terminal remained shut.
Maintenance at Iraq's southern oil export hub is also set to slash supplies by 500,000 barrels per day in September.
Analysts are agreed that sustained supply disruptions would support Brent but many say major price increases would require more widespread cuts and higher demand.
"Crude has to balance between disruptions in Libya and Iraq and the problem of global demand from the rise of the dollar. That is going to cap gains in Brent," said Olivier Jakob, energy markets analyst at Petromatrix in Zug, Switzerland.
"You would need to see more GDP growth in Europe for a longer time before we could expect an impact on oil demand. For now, run cuts in Europe are reducing demand for crude there."
Economic growth in the 17-member euro zone inched up 0.3 percent in the second quarter, with its two biggest economies Germany and France showing unexpected strength, data showed on Wednesday.
The Energy Information Administration (EIA) reported that US crude oil stocks at the Cushing, Oklahoma delivery hub were down 1.36 million barrels to 38.52 million.
Oil prices decline on profit-taking
