Oil remains steady above $115

Brent crude held steady above $115 a barrel, following a $3 surge in the previous session in line with a rebound in equity markets as a ruling by a top German court helped assuage fears that euro zone bailout efforts might get stalled.

Prices were also supported by storms in the US Gulf Coast that have already shut in about 37 per cent of oil production from the region. Investors are awaiting US president Barack Obama's speech on jobs and a European Central Bank rate-setting meeting later for clues on the health of the global economy.

"We saw equities rising and we saw oil put on a 3-4 per cent (rise) last night," said Ben Le Brun, a Sydney-based analyst at CMC Markets. "We have Obama speaking about jobs and if the market gets what it wants to hear, that would further underpin the positive movements on oil prices."

Brent crude slipped 24 cents to $115.56 a barrel by 7.52am, after gaining $2.91 to settle at $115.80, above its 100-day moving average, a key technical indicator that has capped the market since August. In post-settlement trade, prices rose further, pushing on to $116.50, the highest since August 2nd.

US crude gained 12 cents to $89.47 a barrel, after settling $3.32 at $89.34 a barrel, and also climbed in post-settlement trade to a five-week high of $90.48.

European stocks rose 3.1 per cent, while on Wall Street, the S&P 500 rose 2.9 per cent.

The positive mood extended into the Asian market, with Japan's Nikkei gaining 1 per cent, while MSCI's broadest index of Asia Pacific shares outside Japan rose 0.5 per cent.

The European Central Bank is expected to signal a change in policy direction on Thursday, halting a cycle of interest-rate rises just five months after it started as the euro zone debt crisis weighs on the economy.

For Brent, the upside will be limited to $116.83 as a short-term uptrend that started at the August 9 low of $98.74 approaches its end, said Reuters market analyst for commodities and energy technicals Wang Tao.

Prices were also supported by an industry report that showed a steep fall in oil stocks. Stockpiles of US crude fell by 3 million barrels last week due to production shut-ins and lower imports, industry group the American Petroleum Institute said.

That was well above the average forecast of a 1.9 million barrel draw in a Reuters poll ahead of the more closely watched data from the US government's Energy Information Administration (EIA) later today.

In addition, three tropical storms - Nate, Maria and Hurricane Katia - are posing threats to Mexico's Bay of Campeche, Puerto Rico and the US East Coast. Katia has weakened significantly in the last two days, but was still a hurricane with 130km/h winds, making it a Category 1 storm on the five-step Saffir-Simpson intensity scale.

Amid the upbeat mood came negative data from Japan, where core machinery orders tumbled twice as much as expected in July.

This could reflect investment delays by companies due to worries about the strong yen, faltering global growth and slow progress in rebuilding from the March earthquake and tsunami. Weaker oil demand growth could also affect investors' outlook.

EIA had forecast that global oil demand growth next year will be lower than previously projected as the economy staggers.

World consumption will rise by 1.39 million barrels per day (bpd) or around 1.6 per cent next year, some 250,000 bpd less than it forecast a month ago. This year's growth forecast was unchanged at 1.37 million bpd.

Reuters