Oil lower on Tuesday ahead of QE outlook

Oil marked losses in the early European session on Tuesday. Investors remain cautious ahead of Ben Bernankes statement on Wednesday regarding the future direction of Feds Quantitative Easing. Geopolitical unrest in Syria is still spurring concern of spreading into neighbor oil producing countries, while election results in Iran limited oil prices as Hasan Rowhani is seen as the least offensive and open to new conversations with U.S. regarding the country’s nuclear program and the sanctions laid upon Iran. Meanwhile, according to analysts crude reserves in the U.S. are expected to have dropped during last week.

On the New York Mercantile Exchange, WTI crude for August delivery lost 0.27% on the day. Crude traded at $97.77 a barrel at 7:21 GMT. Prices varied between daily high and low at $98.28 and $97.73 a barrel.

Brent oil for August delivery lost 0.16% at 7:22 GMT and stood at $105.31 a barrel. The European benchmark moved between daily high and low at $105.78 and $105.28 per barrel respectively.

Conflicts in Syria have been in markets focus throughout the week. Yesterday, apart from U.S. president, Barack Obama, authorizing lethal weapon shipments to arm Syria rebels, U.K. government also announced it was planning to give Syrian opposition non-lethal support. This will be the main topic in the upcoming G8 meeting.

Carl Larry, president of Houston-based Oil Outlooks and Opinions commented for Reuters: “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. But until we see some clear consensus between the likes of Russia and the U.S. we shouldnt 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.”

Meanwhile, investors are awaiting to see what Ben Bernanke, Fed chairman, has to say on Wednesday about the U.S. economy and the central banks vision of its monetary easing program. Analysts are expecting a slow scale back to be announced at this or at some of the next FOMC meetings. Carl Larry, commented on the topic: “What Im 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 Im looking for minimal slippage at least for oil prices. 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.”

Meanwhile, according to a Bloomberg survey before tomorrows EIA report on U.S. Crude Oil Inventories, crude reserves probably fell 500 000 barrels last week amid increased demand during the driving season. Gasoline stockpiles are expected to have increased by 500 000 barrels during the week ending June 14 and distillate-fuel inventories might have jumped by 925 000 barrels. Refineries are expected to have operated at 88% percent capacity, 0.5% higher than the preceding week. The American Petroleum Institutes separate report is due later today, but it is regarded as less reliable than EIAs as it is based on voluntary information from operators of refineries, bulk terminals and pipelines. The Energy Information Administration is scheduled to publish its report on Wednesday at 14:30 GMT.