Oil prices fairly unchanged

Oil prices remained steady during the early European session on Monday as Middle East tension was offset by news about Irans president election and the lasting global demand concern.

On the New York Mercantile Exchange, both WTI crude and Brent oil hovered near open prices. At 7:02 GMT crude oil futures for August delivery traded at $98.06 a barrel, down 0.02% for the day. Prices varied between days high and low at $98.10 and $97.62 a barrel respectively.

Brent oil for August delivery marked a daily gain to trade at $105.97 at 7:03 GMT, up 0.03% for the day. The European benchmark ranged between daily high and low at $106.05 and $105.42 a barrel respectively.

Although OPEC, IEA and EIA shared the same grim global oil demand outlook, WTI crude rose for a second week in a row despite controversial U.S. data and Brent hit its highest level since April 9, going over $106 a barrel. WTI gained 1.9% for the week and surpassed $98 a barrel on Friday as news about the U.S. government arming Syria rebels spurred concern about a possible supply contraction, if the conflict spreads to neighbor countries.

Oil prices were also supported by weaker dollar as the greenback extended losses versus its major counterparts throughout the week following mediocre U.S. data, positive EU news and Japans decision not to extend further its monetary easing program.

On Friday, Industrial Production in May mismatched forecasts of a 0.2% increase and instead remained unchanged, compared to a revised 0.4% decline for the preceding month. Capacity Utilization couldnt outperform expectations and stood at 77.6%, 0.3% lower than forecast and below April’s revised reading of 77.7%. Treasury International Capital for April rose to 12.7 billion USD, up from 2.1 billion dollars during the preceding period. U.S. current account deficit for Q1 reached 106.15 billion USD, surpassing forecasts of an increase to 111.30 billion USD, but higher than last quarter’s 102.32 billion dollars.

Core PPI both on annual and monthly basis for May met expectations at 1.7% and 0.1% gain respectively. Annual Producer Price Index surpassed projections of a 0.1% jump to reach 0.5%, well above April’s 0.6% increase reading. PPI on a monthly basis jumped to 0.5%, surpassing expectations of 0.1% and way above April’s 0.7% decrease. Unexpected rise of prices spurred concern about inflation, which immediately resulted in a jump of gold and oil prices as a hedging strategy against inflationary effects. Gold went above the $1 390 mark and WTI traded above $98 per barrel, minutes after the data was published.

Also, the Preliminary University of Michigan Confidence mismatched expectations and fell to 82.7 for June. Economists expected the June reading to remain the same as May at 84.5, which was an almost six-year high when reported last month.

Meanwhile, oil prices were pushed down a bit after moderate cleric Hasan Rowhani won the presidential elections in Iran on Friday. He is seen as the least offensive and open to new conversation with the U.S. regarding the countrys nuclear program and the sanctions laid upon Iran.

Ric Spooner, chief market analyst at CMC Markets said for Reuters: “The retreat in the U.S. dollar leading into the Fed meeting has given oil traders some impetus to push through resistance levels. As you can clearly see fundamentals are not supportive of the jump on Friday, the market will now need to see a catalyst like a supply disruption as a result of Middle East tensions, or a further weakening of the dollar for whatever reason.”

Market players are now looking into U.S. Federal Reserves meeting starting Tuesday. Investors are waiting to see whether Ben Bernanke, Fed chairman, will give more information when and how the U.S. central bank will begin scaling back its monetary stimulus, which has been one of the main factors to influence dollar-priced commodities fluctuations.