Brent oil slips, Europe worries weigh

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Brent crude oil fell on Wednesday, pinned near 17-month lows, hit by worries over Spain's high borrowing costs and prospects for global demand growth.

Brent oil for August delivery was down 20 cents at $95.56 per barrel by 1156 GMT. It fell as low as $94.86 earlier, near Tuesday's trough of $94.44, its lowest since January, 2011.

U.S. July crude futures, which expire on Wednesday, were up 25 cents at $84.28 per barrel.

Expectations that the U.S. Federal Reserve's policy meeting may result in stimulus for the world's largest economy gave some lift to U.S. crude, but failed to halt a slide in Brent, which has tumbled around 22 percent this quarter, its biggest fall since late 2008.

"Oil has really decided it has no interest in the FOMC, it has not priced in any significant stimulus," said David Morrison, analyst at GFT Global.

The U.S. central bank will release a policy statement at the end of its two-day meeting later on Wednesday, followed by a briefing by Chairman Ben Bernanke at 1815 GMT.

"It must be because investors are looking ahead and seeing that the situation in Europe isn't going to get any better, while the outlook for demand in the U.S. is poor and China is slowing too," Morrison said.

He added that there was little technical support for Brent crude above the $87.50-$88 per barrel level.

Others pointed to ample supply of crude oil in a market where demand growth is slowing.

"The Fed might provide some short term support but there is a fundamental over-supply of light/sweet crude oil in the Atlantic Basin that neither OPEC nor the Fed can resolve," said Olivier Jakob, at Petromatrix in Zug Switzerland.

Traders said they were not focusing on supply disruption risks posed by sanctions on producer Iran over its disputed nuclear programme.

Brent crude ended lower on Tuesday after negotiations in Moscow to defuse the dispute over Iran's nuclear programme led to plans for technical talks to be held in Istanbul on July 3.

A deal had not been widely expected and although experts said the sides were far apart, they welcomed the fact talks had at least not broken down completely.

Analysts think that there is little chance of substantive progress from the talks.

The market waited for an inventory report from the U.S. government Energy Information Administration on Wednesday later in the day for trading cues. Oil prices could be supported by a projected drop in U.S. crude oil stockpiles for a third straight week.

On average, crude stocks are forecast to have dipped 1.1 million barrels in the week to June 15, according to a Reuters survey of 12 analysts.

The American Petroleum Institute on Tuesday said domestic crude stocks fell by 550,000 barrels last week, with crude imports down 82,000 barrels per day. (Additional reporting by Luke Pachymuthu in Singapore; editing by William Hardy)



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