Oil held steady on Monday, supported by speculative buying, but with the impact of a Turkish incursion into oil-producing northern Iraq fading as a market factor.US light crude for April delivery fell 15 cents to $98.66 a barrel by 1215 GMT. London Brent crude was 6 cents lower at $96.95.
Speculative funds flowed into oil last week as the contract rallied to a record high above $101 a barrel on Wednesday.
“We are seeing little indication that fund infatuation with commodities has waned, particularly as the global stock and bond markets continue to struggle,” MF Global said.
Speculators on the New York Mercantile Exchange increased long positions in crude, RBOB gasoline and heating oil contracts sharply last week, data from the US Commodity Futures Trading Commission showed on Friday.
The Turkish incursion and cold weather in the United States Northwest late last week, the world's largest heating fuel market, had helped oil prices to edge up above $99.
“None of the above factors have much 'staying power'. The Turkish incursion, while troubling, will be of limited duration, and does not seem to be putting any production at risk,” MF Global said in a research note.
Turkish troops engaged Kurdish PKK rebels in close combat on Sunday in a major ground offensive into northern Iraq.
But an official in Iraq's state-owned Northern Oil Company said on Sunday Iraq's exports of crude from its northern fields would not be disrupted by Turkey's move.
The market was also eager for any policy clues from OPEC members ahead of the group's next meeting on March 5.
A senior Iranian oil official said on Monday there was enough crude in the market and saw no reason for OPEC to raise output, an Oil Ministry Web site said.
The remark came just a day after Iran's oil minister Gholamhossein Nozari said he would support an OPEC output cut.
An industry consultant said on Monday the group's oil supply is set to fall by 200,000 barrels per day in February due to lower output from its top two producers, Saudi Arabia and Iran.
The drop in supply suggests some members are trimming output to prepare for seasonally lower demand in the spring, Petrologistics said. (Reuters)