01/04/2012 01:00 EST | Updated 03/04/2012 05:12 EST

Oil hovers below US$103 in Asia as traders eye improving US economy, Iran tensions


Oil prices hovered below US$103 a barrel Wednesday in Asia as investors eyed signs of an improving U.S. economy.

Benchmark crude for February delivery fell 33 cents to $102.63 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract jumped $4.13 to settle at $102.96 in New York on Tuesday.

In London, Brent crude was down 16 cents at $111.97 a barrel on the ICE Futures exchange.

Crude has jumped from $75 in October amid evidence the U.S. economy is slowly growing and may avoid recession this year. Manufacturing expanded in December at the fastest rate in six months, and construction spending rose in November as builders spent more on single-family homes, apartments and remodeling projects.

Investors were also cheered by positive economic signs in Germany and China.

Tensions between Iran and Western powers over the Middle Eastern country's nuclear program have supported oil prices in recent weeks.

On Tuesday, Iran ended 10 days of naval manoeuvrs and warned the U.S. military to stay out of the Persian Gulf. Iran has threatened to close the key oil passageway Strait of Hormuz as possible retaliation to new U.S. economic sanctions. The U.S. has said it will not tolerate such a move.

"Current global economic activity and oil market fundamentals do not justify today's elevated price levels," said energy analyst Richard Soultanian with NUS Consulting. However, "it's clear that the (Iran) situation will not resolve itself quickly and markets will be driven largely by headline risk and not fundamentals for the foreseeable future."

In other Nymex trading, heating oil was steady at $3.04 per gallon and gasoline futures were little changed at $2.75 per gallon. Natural gas futures were down 0.8 cent to $2.99 per 1,000 cubic feet.