Oil steady after cautious Fed remarks

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Brent crude oil held around $108 a barrel on Wednesday after the U.S. Federal Reserve Chairman said plans to roll back the central bank's economic stimulus later this year were not set in stone.

"Our asset purchases depend on economic and financial developments, but they are by no means on a pre-set course," U.S. Fed chief Ben Bernanke said in prepared remarks.

His comments, though broadly in line with analysts' expectations, were enough to generate a small market reaction - nudging the dollar lower and lifting oil off earlier lows.

Brent crude eased 8 cents to $108.06 a barrel by 1347 GMT. U.S. oil slipped 25 cents to $105.75.

"For now, the reaction in the oil market is pretty muted," said Oliver Jakob of Petromatrix in Zug.

"There's no big change in Bernanke's prepared comments. It's still all about a potential reducing of bond buying by the end of the year."

Investors are now awaiting his statement to Congress at 1400 GMT, which will be followed by a question and answer session.

STOCKPILES

Oil, particularly the U.S. benchmark, had been under pressure in earlier trade after an industry report showed a build-up in gasoline stocks in top consumer the United States at the peak of the driving season.

Gasoline stocks rose 2.6 million barrels, against analysts' expectations in a Reuters poll for a 500,000 barrel draw, data from industry group the American Petroleum Institute (API) showed.

Distillate stockpiles, which include diesel and heating oil, rose by 3.8 million barrels compared with expectations for a 1.9 million barrel gain.

The product builds overshadowed a third straight week of declines in crude inventories. A decrease of 2.6 million barrels was reported last week, versus expectations of a 2 million barrel drop.

U.S. crude inventories plunged 20 million barrels over the previous two weeks, the deepest two-week draw on record, Energy Information Administration data showed on July 10.

Worries of supply disruption from the Middle East eased somewhat on hopes the West would soon resume talks with Iran over its disputed nuclear programme.

But investors remain concerned about interruptions to supplies from other major exporters such as Libya. Armed protesters stormed the eastern Libyan oil port of Zueitina demanding export operations be halted, a witness said.



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