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UPDATE 3-Oil stalls at $109 as eyes turn to Fed

Published 08/24/2011, 04:49 AM
CL
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* Brent, U.S. crude stall ahead of Bernanke's speech

* Surprise drop in U.S. oil stocks offer support

* Nigerian force majeure on exports trims supply

* Upcoming EIA data at 1430GMT (Updates throughout)

By Jessica Donati

LONDON, Aug 24 (Reuters) - Oil prices hovered at $109 a barrel on Wednesday as supply disruptions balanced against demand worries and investors remained cautious ahead of U.S. Federal Reserve chairman Ben Bernanke's speech at the end of the week.

Bernanke is expected to express his disappointment over U.S. growth and offer remedial action to kick-start the world's largest economy and key oil consumer.

"There is not a lot of impetus in either direction, with the market caught between problems with supply on one side - Libyan exports offline and probably offline for some time. On the demand side (there is) weak economic growth and slowing demand," said Tobias Merath, Head of Private Banking Commodity Research at Credit Suisse.

Oil trading was likely to remain cautious at least until Bernanke's speech on Friday, which could help clarify the outlook for U.S. economy and provide momentum, Merath added.

Brent crude was down 15 cents at $109.16 a barrel at 0821 GMT, while U.S. October crude was down 28 cents at $85.16 a barrel.

FUNDAMENTAL WORRIES

Reduced crude stockpiles in the United States, a still uncertain outlook for Libyan exports and a force majeure by Royal Dutch Shell on Bonny Light sweet crude declared on Tuesday are providing support on the supply side.

Attention on Wednesday is focused on U.S. crude inventory data due from the Energy Information Administration (EIA) at 1430 GMT, after API data showed stocks fell a surprise 3.3 million barrels in the week to Aug. 19, against analyst forecasts for an 800,000-barrel rise.

Trade sources said the entire Bonny Light programme - around 190,000 barrels per day (bpd) in September and 216,000 bpd in October - had been withdrawn after a hacksaw attack on Tuesday.

In Libya, rebels appeared to deliver a decisive blow to Muammar Gaddafi's 42-year rule after forcing him to flee his compound in Tripoli. But worries remain about internal divisions within the opposition sparking a new period of instability and further hampering oil exports.

Libya's former top oil official Shokri Ghanem said on Monday it would take as long as 18 months for the country's oil flow to reach the pre-war level of around 1.6 million barrels per day (bpd), nearly 2 percent of global supply.

On the demand side, investors' hopes remain pinned on the Fed to rescue the U.S. and euro zone economies from sliding back into recession. German business sentiment added to gloom, dropping more than expected in August in a further sign European growth is slowing. ???? (Additional reporting by Seng Li Peng; editing by Keiron Henderson)

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