Oil above $107, U.S. stocks and Iran in focus | Reuters

Oil above $107, U.S. stocks and Iran in focus | Reuters: "(Reuters) - Oil held above $107 a barrel on Thursday as investors looked ahead to a U.S. report that is expected to show falling crude and fuel stockpiles and as Iranian threats to halt a vital oil trade lent support.

A report from the U.S. government's Energy Information Administration (EIA) at 1600 GMT was forecast to show crude stocks fell by 1.7 million barrels. That was before Wednesday's report from industry group the American Petroleum Institute said they rose by 9.6 million barrels, which weighed on prices overnight."

Brent crude rose 9 cents to $107.65 a barrel by 1227 GMT after falling nearly $2 the day before. Wednesday's decline snapped a string of six straight sessions of gains. U.S. crude climbed 37 cents to $99.73.

"Worries over Iran are supportive. The market is up even though the API stats were bearish, so people may be waiting for the EIA," said Christopher Bellew, an oil broker at Jefferies Bache.

Low trading volume due to the holiday season was expected to exaggerate price moves. Brent faces resistance at $109.40, the level of the 100-day moving average, and at $109.50, the intra-day highs of the two previous sessions.

A weaker euro limited the rise in oil prices. The euro fell to its lowest since September 2010 versus the dollar on Thursday as yields at an auction of Italian debt remained at levels seen as unsustainable.

Gains in the dollar can pressure dollar-denominated commodities by making them more expensive to consumers using other currencies. Gold fell to its lowest in almost six months and copper retreated for a second day.

"A big increase in U.S. crude oil stocks and the falling euro against the dollar are the main pressure points for the market at the moment," said Ken Hasegawa, a derivatives manager with brokerage Newedge in Tokyo.

Brent is still on track to post a 13 percent gain in 2011, supported by the virtual shutdown of Libya's oil exports for much of the year, after a nearly 22 percent rise in 2010.

With Libyan output and exports now recovering, investors' concern over oil supplies has shifted to Iran, the world's third-largest oil exporter in 2010, according to the EIA.

Iran, at odds with the West over its nuclear program, said on Tuesday it would stop the flow of oil through the Strait of Hormuz if sanctions were imposed on its crude exports.

The U.S. Fifth Fleet, which patrols the seas of the Middle East and Central Asia, said on Wednesday it would not allow any disruption to seaborne traffic in the area.

(Additional reporting by Randy Fabi in Singapore; editing by Jane Baird)

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