Brent steady; U.S. oil up on company earnings

Brent was steady above $111 on Tuesday as looming concern over Europe’s economic health kept prices in check, while U.S. oil rose for a third straight day, boosted by improved company earnings.

Brent crude futures fell 32 cents to $111.13 a barrel at 0655 GMT (2:55 a.m. EDT), retreating from an intraday high of $111.55 a barrel.

U.S. crude climbed 39 cents to $91.66 a barrel.

"The real economy in Europe is not that strong," said Masaki Suematsu, a broker at Newedge in Tokyo.

"The refining and industry sectors are reducing operation rates. WTI on the other hand is linked more to equities’ performance."

Out of the 142 companies in the S&P 500 that have reported quarterly earnings through Monday, 68 percent have topped Wall Street estimates, according to Thomson Reuters data.

Gains in U.S. crude have narrowed the discount of the grade to Brent. The spread — used to measure U.S. crude’s discount to global prices — shrank to $19.47 from a record of about $28 a barrel on October 14.

"There’s plenty of room for that to further close," said Melbourne-based Michael McCarthy, chief markets strategist at CMC Markets.

"The market has priced in the worst-case scenario where the global economy was moving into a recession. The market is making the price adjustments to reflect a low-growth environment rather than a negative-growth environment."

Caterpillar Inc (CAT.N) jumped 5 percent to $91.77 to lead the Dow higher on Monday after the world’s largest heavy equipment maker reported a 44 percent rise in quarterly profit on record revenues.

Adding to the positive tone was a batch of mergers and acquisitions in the healthcare and technology sectors involving deals totaling more than $5 billion.

OPEC MEETING

U.S. oil has potential upside where it could rise to $95.42, as indicated by its wave pattern and a Fibonacci projection analysis, said Reuters market analyst Wang Tao.

Venezuela’s Energy Minister Rafael Ramirez commented on Monday that oil prices at $100 a barrel were "comfortable" for producers and for the world economy.

The South American OPEC member said it would insist the Organization of Petroleum Exporting Countries, which accounts for 40 percent of global output, meet production quotas.

OPEC has not changed its formal target since December 2008, and early comments from OPEC officials suggest the group’s next gathering on December 14 may result in another "no change" decision that leaves the door open for informal adjustments.

UPCOMING DATA AND EVENTS

The market is now closely watching U.S. supplies for direction as weekly inventory data from the American Petroleum Institute and the U.S. Energy Information Administration will be released on Tuesday and Wednesday respectively.

A Reuters poll of analysts forecast a 2 million-barrel build in crude supplies, with refined products falling.

European leaders, who worked toward a deal over the weekend on bank recapitalization, will meet again on Wednesday after final decisions were deferred.

Sharp differences remain over the size of losses private holders of Greek government bonds will have to accept.

Reuters