Brent drops toward $118 on demand fears
Singapore, February 10, 2012
Brent crude slipped from a six-month high towards $118 a barrel on Friday as data from China showed a soaring trade surplus due to crumbling imports for January, stoking fears of a slowdown in demand from the world's second largest oil consumer.
The market also remained sceptical on whether a Greek deal on Thursday to secure a second bailout and avoid a default would resolve the euro zone's two-year old debt crisis.
However, losses were checked as China's crude oil imports stayed firm last month, rising 7.4 percent from a year ago to 5.5 million barrels per day (bpd), its third-highest on record.
Analysts also pointed out that the Chinese data was distorted by the week-long Lunar New Year break in January, adding that the long-term oil demand outlook from China was still positive.
"Demand has been affected by seasonal factors. We expect GDP growth to accelerate in China as the government implements more stimulatory measures, and this will be positive for oil demand," said Gordon Kwan, head of energy research at Mirae Asset Management in Hong Kong.
Front-month Brent fell 41 cents to $118.18 a barrel by 0430 GMT, snapping eight straight sessions of gains. U.S. crude shed 36 cents to $99.48 a barrel.
Customs data on Friday showed China's imports sank 15.3 percent in January versus January 2011 -- the lowest since August 2009 -- while exports fell 0.5 percent over the same period, the worst showing since November 2009.
It left China with a trade surplus of $27.3 billion in January, its biggest in six months and confounding expectations of a further narrowing.
Euro Zone caution
Optimism over the Greek bailout deal was tempered by demands from the country's global lenders for more steps and a parliamentary seal of approval before providing any aid.
"Traders are taking profit on the news of the Greece deal. Oil prices had ramped up in anticipation of the deal. There is some hope that the euro zone crisis will not spin into a global recession, but some caution remains," said Kwan.
Brent crude had surged about 7 percent since Jan. 31 up to Thursday, its highest eight-day percentage gain since October.
Oil prices were also supported by positive economic data out of the United States, where the number of Americans signing up for unemployment benefits fell unexpectedly last week, the latest sign of an economic recovery in the world's top oil consumer.
Brent faces a resistance at $118.65 per barrel and will retrace to $117.50, the Feb. 7 high, while U.S. crude will revisit the Feb. 8 low of $98.10, Reuters technical analyst Wang Tao said. – Reuters