UPDATE 1-Brent edges above $106; Fed stimulus, oil stocks in focus

Jacob Gronholt-Pedersen
Wednesday, 13 Nov 2013 | 12:49 AM ET

* Oil hit on Tue by Fed official's comment on possible tapering

* U.S. stockpiles seen rising 1 million barrels last week

* OPEC says its output remains higher than demand

(Adds analyst quote, updates prices)

SINGAPORE, Nov 13 (Reuters) - Brent crude edged above $106 per barrel on Wednesday, recovering some lost ground after oil was hit by speculation the U.S. Federal Reserve may soon start to reduce its monetary stimulus.

Appetite for risk assets such as oil fell on Tuesday on worries about reduced liquidity after Atlanta Fed President Dennis Lockhart said a reduction in the Federal Reserve's monthly $85 billion in bond purchases remained a possibility at the bank's next policy meeting in mid-December.

Expectations of a build in U.S. crude stocks have also been weighing on prices.

Brent for December delivery was 26 cents higher at $106.07 per barrel at 0539 GMT, after settling 59 cents lower on Tuesday.

U.S. crude was up 9 cents at $93.13 per barrel. The contract fell more than $2 a barrel on Tuesday, hitting a four-and-a-half-month low.

"Traders are just trying to second-guess what the Fed's next move will be," said Ben Le Brun, a market analyst at OptionsXpress in Sydney.

"It wouldn't surprise me to see oil prices going a little bit higher, given the falls we've seen, but confirmation of a rebound will not happen until we know what the Fed's intentions are," he said.

Expectations of a gain in U.S. crude stocks capped gains. A preliminary poll of Reuters analysts forecast a 1-million-barrel rise for last week when the U.S. Energy Information Administration publishes its data on Thursday.

Industry group the American Petroleum Institute will release its report on U.S. oil stocks on Wednesday at 2130 GMT.


Output from the Organization of the Petroleum Exporting Countries remains higher than next year's global requirement for its crude, the group said in its monthly report on Tuesday, even after Saudi Arabia cut production from a record high level in October.

OPEC forecast demand for its oil in 2014 would average 29.57 million barrels per day (bpd), unchanged from its previous estimate. The oil cartel pumped 29.89 million bpd in October, according to secondary sources cited by the report.

Lack of success at weekend talks on Iran's nuclear programme lifted Brent off last week's four-month low, with little optimism that more than 1 million bpd of Iranian barrels will return to oil markets soon. That's about what has been reduced from Iran's pre-2012 export levels.

"It does not appear to us that a breakthrough will emerge soon and that continuing lost Iranian barrels will remain a supportive factor to oil prices," BNP Paribas head of commodity markets Harry Tchilinguirian said in a note to clients.

Investors will await for the next round of talks on Nov. 20 for clearer signals as to whether sanctions against Tehran will be relaxed.

Supply from Libya also looked unlikely to return to normal as the government struggles to cope with protesters who have taken over eastern oil ports and a western terminal.

Protesters demanding more rights or better conditions blocked the front gate of the Zawiya refinery and oil port on Tuesday, but production continued at the 120,000 barrel-per-day plant.

In China, leaders said markets would play a decisive role in the economy under reforms to be pushed through by 2020, although the statement issued at the end of the Communist Party's four-day meeting on Tuesday was short on details.

(Editing by Alan Raybould and Tom Hogue)