Oil retreated slightly on Wednesday, snapping five days of gains as U.S. Federal Reserve Chairman Ben Bernanke offered few signs of further monetary stimulus and a gloomy view of the economy of the world's top oil consumer.
Brent crude slipped 24 cents to $103.76 a barrel by 3PM after settling 63 cents higher on Tuesday. U.S. oil fell 23 cents to $88.99 a barrel after ending up 79 cents.
Bernanke in his testimony to the Senate Banking Committee said the Fed stood ready to offer more stimulus as needed but stopped short of signaling action in the near term.
He also said recovery was being held back by anxiety over Europe's debt crisis and expressed unease over a stagnant jobs market.
A slightly more downbeat outlook on prospects for the global economy saw investors sell Brent crude, with some locking in profits after a 16 percent increase in prices from the lows for the year touched last month.
"Oil fell pretty rapidly after traders and investors had seen what was in the testimony, so crude was responding to whether we are going to see (quantitative easing) or are we not," said David Morrison, analyst at GFT Global."
More From This Section
But he noted the sharp move lower on Tuesday was soon reversed, and that it was likely there would be stimulus before the end of the year.
Oil stayed close to its highest since the end of May, with geopolitical risk supporting prices.
Iran said it would insure any foreign ships that enter its waters, in an effort to skirt a European Union ban on insuring ships carrying Iranian crude that has hampered the country's oil exports.
The EU enacted a ban on July 1 on insurance for tankers carrying Iranian oil, preventing EU insurers and reinsurers from covering tankers carrying Iran's crude anywhere in the world.
"The geopolitical risk premium is coming back. There is quite a large concentration of U.S. warships in the (Middle East) Gulf. There's a heightened risk in the area," Morrison said.
US inventories
Investors were awaiting data on crude stockpiles in the United States due later in the day from the Energy Information Administration (EIA) to confirm an industry report that said inventories fell more than expected.
Crude inventories fell by 2 million barrels in the week to July 13, gasoline stocks fell by 116,000 barrels and distillate stocks rose by a sharp 3.4 million barrels, data from the American Petroleum Institute showed.
A Reuters poll of 10 analysts forecast a 1.2 million barrel drop in domestic crude inventories. Gasoline inventories were forecast up 1.2 million barrels, on average, while distillate stocks were projected to rise 1.5 million barrels.
"Seasonality appears to be a positive influence with draw-downs on high U.S. crude oil stocks, to fuel the peak of the U.S. driving season, encouraging buying," analysts at ANZ said in a note.
Brent will retrace into a range of $101.24-$102.07 per barrel, as suggested by its wave pattern and the RSI indicator, while U.S. oil faces resistance at $89.50 per barrel and may revisit its Tuesday low of $87.41, according to Reuters technical analyst Wang Tao.
Latest data on China's home prices may help provide a floor on oil as the numbers showed a break from eight straight months of decline, in a tentative sign pro-growth policies are gaining traction in the world's second-biggest oil consumer.