* Italian vote deadlock revives euro zone worries
* Fed's Bernanke defends bond-buying stimulus
* Iran and big powers hint at nuclear talks concessions
(Updates with inventory data, paragraphs 17-21)
By Gabriel Debenedetti
NEW YORK, Feb 26 Brent crude oil fell to a
one-month low under $113 a barrel on Tuesday as inconclusive
Italian election results revived investor concerns about
instability in the euro zone and about future demand for fuel.
The vote result in the euro zone's third-largest economy
stoked fears that the country's politicians would be unable to
form a government strong enough to carry out effective reforms.
The election results "played out in the end of the day
yesterday" in the markets, pushing prices lower early on
Tuesday, said Gene McGillian, analyst at Tradition Energy in
Oil markets also watched as U.S. Federal Reserve Chairman
Ben Bernanke, in testimony before Congress early on Tuesday,
defended the central bank's bond-buying stimulus, which is seen
as tied to the economic recovery and thus oil demand.
Bernanke warned about the risks of sharp spending cuts set
to go into effect on Friday, but also said the central bank has
all the tools it needs to retreat from its monetary support in a
But the oil complex decoupled from U.S. equity markets,
which had rebounded from a sharp selloff Monday as poll results
in Italy pointed to deadlock. The Dow Jones industrial stock
average was up 0.8 percent at 3:05 p.m. EST (2005 GMT).
Brent crude hit a session low of $112.41 a barrel,
its weakest since Jan. 24, and settled down $1.73 at $112.71.
U.S. crude oil was down 48 cents at $92.63 a barrel,
after touching a low of $91.92, a level not seen since Jan. 4.
Brent rallied to a nine-month high near $120 in early
February but has since fallen back on signs the global economy
Brent fell below technical support at the 50-day moving
average for the first time since January, a key indicator of
market sentiment watched by traders.
The RBOB gasoline contract for March delivery led
losses for much of the trading day, down more than 7 cents to
$2.9816 per gallon.
RBOB has been on an upswing since hitting a low of $2.6915
in mid-January, but with the March contract expiring on Feb. 28
ahead of the switchover to higher-specification summer fuel,
traders said the move higher may have been overdone.
"Gasoline rose on increasing demand, which was being
fostered by the improving economy and U.S. employment," said
John Kilduff of the Again Capital hedge fund in New York.
"Recent events in Europe and the looming U.S. spending cuts
threaten that outlook."
Investors also eyed talks in Kazakhstan between major powers
and Iran over Tehran's nuclear program. The group of six nations
- the United States, Russia, China, Germany, Britain and France
- was expected to offer Iran limited sanctions relief on Tuesday
if it agrees to halt its most sensitive nuclear work.
While few traders expected the meeting to create an
immediate breakthrough, a reduction in tensions could weigh on
U.S. OIL INVENTORIES
U.S. crude stocks rose 904,000 barrels last week, the
American Petroleum Institute (API) reported on Tuesday.
Crude stocks at Cushing, Oklahoma, were down 206,000 barrels,
while gasoline stocks were down 1.4 million barrels and
distillate stocks were off 1.7 million barrels, the API said.
Analysts had expected U.S. crude stocks to rise 2.4 million
barrels, according to a Reuters survey of analysts taken ahead
of weekly inventory reports from API and the U.S. Energy
Information Administration (EIA).
Gasoline stocks had been expected to fall by 900,000 barrels
and distillate stocks were expected to drop 1.4 million barrels.
The EIA numbers are due on Wednesday at 10:30 a.m. EST (1530
(Addtional reporting by Peg Mackey and Alex Lawler in London
and Manolo Serapio Jr. and Manash Goswami in Singapore; Editing
by Alison Birrane, Dale Hudson, Alden Bentley, Gunna Dickson and