NEW YORK (Reuters) - Oil prices fell on Tuesday on expectations that potential central bank stimulus may not be enough to revive sputtering economic growth and as hopes dimmed that the U.S. Federal Reserve will act this week to boost growth.
Supportive data from the United States, including higher home prices, improved consumer confidence and a boost in Midwest business activity, was seen as lowering the chance of more stimulus from the Fed when its two-day policy meeting ends Wednesday.
"Oil prices are lower on the paradox of slightly better economic data in the form of the Chicago PMI and the consumer confidence reading," said John Kilduff, a partner at Again Capital LLC in New York.
"The slightly positive readings may keep the Fed from acting as fully as the markets have priced in. Also, the comments from various German leaders have taken away some the expectations for ECB action," Kilduff added.
While crude futures headed lower for a second straight session, Brent crude remained on pace to post a 7 percent rise in July and to snap a string of three monthly declines.
U.S. crude is set to post a monthly gain of more than 3 percent, ending a two-month streak of declines.
Brent September crude fell $1.40 to $104.80 a barrel by 12:39 p.m. EDT (1639 GMT), having swung from $104.52 to $106.52.
U.S. September crude slumped $1.95 to $87.83 a barrel, having dropped to $87.74 intraday.
Total crude trading volumes remained lackluster, with dealings for Brent and U.S. crude well below 30-day averages.
August U.S. gasoline and heating oil futures also felt pressure ahead of the front-month contracts' expiration on Tuesday.
Slowing growth in the United States, the world's top oil consumer, has fueled expectations of stimulus measures from the Federal Reserve, which starts a two-day policy meeting on Tuesday, although caution about the likelihood the Fed will act immediately was evident as the meeting neared.
A promise last week by European Central Bank President Mario Draghi that the ECB would do whatever it takes within the bank's mandate to protect the euro raised expectations of new policy measures to solve the debt crisis when the ECB meets on Thursday.
Germany's finance minister on Tuesday reiterated its view that there is no need to grant a banking license to the euro zone's new bailout fund. Such a move could enable the fund to buy large amounts of debt issued by troubled euro zone economies.
Oil received support early after a pledge by leaders in China, the world's biggest energy consumer, to increase fiscal and monetary support to the economy in the second half of the year.
(Additional reporting by Gene Ramos in New York, Peg Mackey in London and Luke Pachymuthu in Singapore; Editing by David Gregorio and Bob Burgdorfer)
Source: http://news.yahoo.com/oil-slips-below-106-stimulus-hopes-fade-084550493--finance.html
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