Oil prices pared gains in late trading on Thursday as the dollar recouped some losses, erasing much of the day's advance that was fostered by the US Federal Reserve's pledge on Wednesday to keep interest rates low well into 2014. Crude futures took a cue from Wall Street, where a rally sputtered in the wake of downbeat home sales data, part of a mixed set of US economic data that had elicited caution among oil investors early on.
The outlook for crude supplies also kept a cap on prices. Extra crude from Saudi Arabia, Iraq and Libya should make up for any Iranian oil lost through sanctions against Tehran for its disputed nuclear program. "Equities came under pressure and while the durable goods numbers were good, jobless claims rose and you still have no deal on Greek debt, so we had no momentum or new buying above $101 (for US crude)," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
Persistent worries about the health of Europe's economy fuelled pressure as Greece's critical debt-restructuring negotiations with private lenders entered a new phase. The focus now is on how much the European Central Bank and other public creditors may need to contribute. The US dollar was down just 0.21 percent against a basket of currencies, with the euro turning negative against the dollar, according to Reuters data. In early trading, the euro hit a five-week high against the greenback.
By 2:20 pm EST (1920 GMT) ICE Brent crude for March delivery was up 82 cents at $110.63 a barrel, after hitting an intra-day high of $111.89. US March crude was up 20 cents at $99.60, after having touched a session high of $101.39 early. Brent's premium against US crude widened to around $11.20, from $10.41 on Wednesday. Iranian President Mahmoud Ahmadinejad said the European Union rather than his country will lose under new EU sanctions banning the import of Iranian oil by July 1. His remarks, part of a speech broadcast on state radio, came as Iranian lawmakers said they might cut supplies to the EU ahead of the July deadline.
EU's move, plus new US measures aimed at making it harder for countries to buy oil from Iran, Opec's No 2 exporter, constitute the toughest sanctions yet aimed at pressuring Tehran to curb its nuclear programme. Meanwhile, the nagging euro zone crisis was still stoking oil demand.
On Wednesday, German Chancellor Angela Merkel, in a keynote address to the annual World Economic Forum in Davos, Switzerland, deflected pressure for Berlin to increase the bloc's fund rescue fund, saying the solution to the crisis was to restore lost trust in governments' policies and closer European integration.
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