Brent oil steadies below $86 on signs of European strength

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Brent crude oil steadied below $86 a barrel on Tuesday, after dipping close to $85 earlier in the day, supported by a rally in European equities and a fall in the U.S. dollar.

European shares rose in early trading as a number of blue-chip companies posted better than expected results, alluding to recovering growth in the continent's demand for oil.

The U.S. dollar slipped late on Monday after data revealed the U.S. services sector in October grew at its slowest rate since April.

A weaker dollar helps global consumers buy dollar-denominated commodities such as oil.

But Chinese data on Tuesday showed profits in the industrial sector had slipped in the first nine months of 2014, reinforcing signs of a slowdown in the world's largest oil importer.

"We see the market being fairly stable this week, and I think we are within $5 of a longer-term floor" said Olivier Jakob, an oil analyst at Petromatrix.

Brent crude for December was down 10 cents at $85.73 a barrel by 1310 GMT, while U.S. December crude was up 5 cents at $81.05 a barrel.

U.S. West Texas Intermediate futures touched $79.44 on Monday, its lowest since June 2012, before rallying to close at $81.

"$80 is a strong level of support for WTI, while Brent has mostly been able to hold above $85," said Jakob.

After weeks of sharp falls, prices are approaching or falling below the levels forecast by major investment banks.

This expert says plunging oil prices are problematic
This expert says plunging oil prices are problematic

Barclays on Tuesday revised its forecast for Brent in 2015 to $93 a barrel, down from $96, and for WTI to $85 from $89.

Goldman Sachs on Sunday cut its forecast for Brent to $85 a barrel from $100 for the first quarter of 2015 and reduced its projection for U.S. crude to $75 from $90, citing rising production and insufficient demand.

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Analysts from other major banks have also cut forecasts for 2014 and 2015 crude oil prices, citing global growth concerns, a strengthening dollar and ample supplies.

In the United States, analysts saw commercial crude stocks up by 3.5 million barrels last week, while stocks of distillate and gasoline likely fell, according to a preliminary Reuters survey.

Industry group the American Petroleum Institute (API) will issue its inventory report at 2030 GMT, and the U.S. Department of Energy's Energy Information Administration (EIA) will release the official data on Wednesday.

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