Oil fluctuates ahead of U.S. data, Fed meeting

West Texas Intermediate slightly retreated in early European trading on Monday as market players weighed the release of key U.S. economic data against speculations of the outcome of two-day talks between Iran and Western major powers over the Islamic republics nuclear program.

On the New York Mercantile Exchange, WTI crude for delivery in December slipped 0.15% to $97.71 per barrel by 8:35 GMT, down 0.14% on the day. Prices held in range between days high and low of $97.80 and $97.51 per barrel respectively. The U.S. benchmark fell by nearly 3% last week, a sixth decline in seven.

Meanwhile on the ICE, Brent futures for settlement in December added 0.46% by 8:35 GMT and traded at $107.43 per barrel. Prices varied in a days range between $107.47 and $106.86 per barrel. The European benchmark fell by 2.7% last week, the most in a month, after it shed 0.8% in the preceding five-day period.

Oil prices swung between gains and losses ahead of the release of key U.S. economic data this week that will help gauge demand prospects in the worlds biggest consumer and provide information about the timeline of Feds stimulus program. The Federal Open Market Committee will hold a two-day meeting starting tomorrow where policy makers will assess the damage the 16-day government shutdown caused to the fourth quarter economic growth. Broad expectations call for a delay in tapering until some point in 2014 after employment data last week showed that job growth slowed in September and applications for initial unemployment benefits fell less than expected.

Ken Hasegawa, a commodity sales manager at Newedge Japan, said for CNBC: “It looks like we are getting farther and farther away from the tapering of U.S. easing. When there was a near consensus that the tapering should begin from around November, the market easily made one-sided bets, but now we dont know whether that happens by the end of the year, so the market is hard to move in either direction in light trading.”

According to a Bloomberg survey of 40 analysts conducted on October 17-18, the Fed will begin decelerating its monetary stimulus in March.

Data later today may show that industrial production in the U.S. picked up in September. According to the median estimate of 78 analysts surveyed by Bloomberg, output rose by 0.4% last month, the same as in August. Manufacturing, which makes up 75% of total production, likely advanced by 0.3%, down from 0.7% in August. A separate report might show that pending home sales rose by 0.5% in September following a 1.6% decline a month earlier.

On Tuesday, data may show that U.S. retail sales gained 0.2% in September, the same as a month earlier, while producer inflation advanced by 0.6% on annual basis, down from 1.4% in the preceding period. Octobers consumer confidence, reported by the Conference Board, may have dropped to 75.0 from 79.7 in September. On Wednesday, data may show that consumer inflation accelerated by 0.2% in September from a month earlier, while year-on-year the Consumer Price Index probably rose by 1.2% after adding 1.5% the preceding period. Private sector employment, reported by Automatic Data Processing, is expected to have added 148 000 jobs in October, down from 166 000 in September.

A report by the Labor Department might show on Thursday that the number of people who filed for initial unemployment benefits fell to 335 000 in the week ended October 26 from 350 000 in the preceding five-day period. On Friday, the Institute for Supply Management is expected to report that U.S. manufacturing activity expanded at a slower pace in October. The ISM Manufacturing index is likely to have fallen to 55.1 from 56.2 in September.

Market players will also be keeping a close watch on the outcome of a meeting between Iranian diplomats and their Western colleagues on October 30-31 before a second round of negotiations is held in Geneva early next month. A senior Iranian official said on Saturday that his country hasnt halted its uranium enrichment network, contradicting a statement by another lawmaker earlier in the week. Any news of scaling back the enrichment program would pressure down oil prices as Iran is expected to use such steps as a way to negotiate lifting some of the U.S. sanctions which curbed the nations oil exports and battered its economy.