Brent Oil Holds Above $112
Brent oil held above $112 per barrel on Tuesday as investors took heart from upbeat manufacturing data in China, while conflicts in Iraq and Ukraine underpinned supply concerns.
China's factory growth rose to a six-month high, adding to signs the economy of the world's second-biggest oil consumer is regaining strength.
"The latest data from China suggests that the main economic and oil demand growth engine of the world may be starting to turn the corner toward the upside," said Dominick Chirichella of the Energy Management Institute.
Oil markets have for weeks been rattled by supply concerns due to the Ukraine crisis, while a takeover of large areas of Iraq by Sunni militants has stoked fears of disruption in exports from OPEC's second-biggest producer.
Brent crude gained 9 cents to $112.45 a barrel by 1253 GMT. U.S. oil was up 50 cents to $105.87 a barrel.
"Geopolitical concerns will continue to underpin (oil) and we will remain in a fairly elevated range in the near future," CMC Markets analyst Michael Hewson said.
"Iraq has stabilised for now but we are by no means out of the woods and it remains a very fluid situation," he said, adding that the prospects of sanctions against oil producer Russia over the Ukrainian crisis remain high.
"Brent will need to get below $111 a barrel to suggest political risk is subsiding," according to Hewson.
Iraq's new parliament convened on Tuesday under pressure to name a unity government to prevent the country splitting apart after an onslaught by Sunni militants who have declared a "caliphate" to rule over all the world's Muslims.
In Ukraine, Kiev renewed military operations against pro-Russian separatists in the east, as President Vladimir Putin vowed to protect interests of ethnic Russians abroad.
U.S. Stocks Draw
The U.S. oil benchmark drew support from forecasts crude inventories fell last week. A preliminary Reuters poll put the decline at 2.3 million barrels.
The survey took place ahead of weekly inventory reports from industry group the American Petroleum Institute (API) and the U.S. Energy Information Administration (EIA).
A slide in OPEC's output also supported prices. The producer group's output fell in June from May's three-month high, a Reuters survey found, as fighting in Iraq closed the country's largest refinery and technical problems slowed its southern exports. Iraq's supply problems underline how unrest and outages in the Middle East and Africa are taking their toll on OPEC supply.
A Reuters monthly poll of 26 analysts forecast Brent crude oil would average $108.00 a barrel in 2014, the highest average forecast of a Reuters poll so far this year and well above the $105.90 average projected in last month's poll.
(By Ron Bousso, Additional reporting by Manash Goswami; Editing by Jason Neely and Keiron Henderson)
