Oil prices hovered near $109 a barrel on Wednesday as supply disruptions balanced against demand worries, and caution stalled investors ahead of U.S. Federal Reserve chairman Ben Bernanke's speech at the end of the week.
Bernanke is expected to express his disappointment over U.S. growth and offer remedial action to kick-start the world's largest economy and key oil consumer.
"There is not a lot of impetus in either direction, with the market caught between problems with supply on one side - with Libyan exports offline and probably offline for some time - and weak economic growth and slowing demand," said Tobias Merath, Head of Private Banking Commodity Research at Credit Suisse.
Oil trading was likely to remain cautious at least until Bernanke's speech on Friday, which could help clarify the outlook for U.S. economy and provide momentum, Merath added.
Brent crude <LCOc1> was down 41 cents at $108.90 a barrel at 1018 GMT, while U.S. October crude <CLc1> was down 30 cents at $85.14 a barrel.
Reduced crude stockpiles in the United States, a still uncertain outlook for Libyan exports and a force majeure by Royal Dutch Shell <RDSa.L> on Bonny Light sweet crude declared on Tuesday are providing support on the supply side.
Trade sources said the entire Bonny Light programme - around 190,000 barrels per day (bpd) in September and 216,000 bpd in October - had been withdrawn after a hacksaw attack on Tuesday.
"The force majeure in Nigeria is important, but not as important as it was last time as demand has fallen since and hence there should be room for the force majeure in the supply/demand balance," said Thorbj��rn Bak Jensen, an oil market analyst at A/S Global Risk Management Ltd.
With falling demand expectations limiting the impact of lost output, the main focus of attention on Wednesday is U.S. crude inventory data, due for the Energy Information Administration (EIA) at 1430 GMT.
On Tuesday, API data showed a surprise 3.3 million barrel draw in the week to Aug. 19, against analyst forecasts for an 800,000-barrel rise.
The outlook for Libya is still uncertain, where worries remain about internal divisions within the opposition in the post-Gaddafi era, potentially sparking a new period of instability and further hampering oil exports.
On Monday Libya's former top oil official Shokri Ghanem said it would take as long as 18 months for the country's oil flow to reach the pre-war level of around 1.6 million barrels per day (bpd), nearly 2 percent of global supply.
On the demand side, investors' hopes are pinned on the Fed to rescue the U.S. and euro zone economies from sliding back into recession. German business sentiment added to gloom, dropping more than expected in August in a further sign European growth is slowing.
"Currently it is wait and see for Friday's Jackson Hole speech by Bernanke and the possible QE3 ahead," Jensen continued. (Additional reporting by Seng Li Peng; editing by Keiron Henderson)