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Brent slips under $106 on caution

The overwhelming uncertainty over the health of the global economy offset news of lower production from the 12-member Organization of the Petroleum Exporting Countries (OPEC) and an expected drop in U.S. crude stockpiles.

Brent crude eased 38 cents to $105.82 per barrel by 0629 GMT after having dropped to a low of $105.78 earlier in the session. U.S. crude was down 20 cents to $89.58, after hitting a low of $89.51 earlier.

Brent has risen 8 percent in July, the biggest monthly gain since February, while U.S. crude has added more than 5 percent so far this month, snapping a two-month losing streak.

Supply from OPEC fell by 450,000 barrels per day (bpd) in July to 31.18 million bpd, a Reuters survey showed. Investors are now eyeing data on stockpiles in top oil consumer the United States.

U.S. crude stockpiles are expected to have fallen by 1.6 million barrels last week due to lower imports, a Reuters poll of analysts showed ahead of weekly inventory data from the American Petroleum Institute later on Tuesday.

Economic growth worries weigh

But sluggish growth in the United States and continued uncertainty over how quickly European leaders can revive their economy weighs heavily on the minds of investors.

“The market has already adjusted to Mr. Draghi’s comments from last week, now they will be waiting to see details of a concrete plan to move the euro zone forward,” Spooner said.

European Central Bank President Mario Draghi promised last week to do what it takes to protect the euro, raising expectations of new policy measures to solve the debt crisis when the ECB meets on Thursday.

“The immediate problem that needs to be fixed is rising Spanish bond yields,” Spooner said. “The market will be looking for the ECB to stand ready to buy bonds in the secondary market and bring these levels down.”

A rally in Italian and Spanish government bonds showed signs of flagging on Monday as investors waited for European policymakers to back up pledges to safeguard the euro with new anti-crisis measures.

Spain slid deeper into recession in the second quarter as a tough new round of austerity to head off the budget crisis that threatens the euro affected both overall demand and the price consumers have to pay for goods.