Brent slips to $114 on China worries
Singapore, October 15, 2012
Brent futures slipped to $114 on Monday, declining for a second day due to worries over the worsening outlook for demand growth, although mounting supply concerns on escalating tensions in the Middle East kept losses in check.
A poll indicating China may have expanded in the third quarter at the slowest pace since the first three months of 2009 overshadowed data over the weekend showing an improvement in commodity imports by the world's second-biggest oil consumer.
Prices were also hurt as the International Energy Agency (IEA) last week cut its demand growth forecast for next year.
Brent crude had slipped 61 cents to $114.01 a barrel by 0330 GMT, after sliding 75 cents in the previous session. U.S. oil fell more than a $1 to $90.82 earlier in the session and traded 74 cents lower at $91.12.
"China is now shifting to a more moderate growth rate of 7 to 8 percent, but most investors are seeing it as a negative," said Tetsu Emori, a Tokyo-based commodities fund manager at Astmax Investment.
"The heating up of tensions in the Middle East and limited spare supply capacity is supporting prices."
The IEA said ample supply from North America and Iraq coupled with declining global demand could lead to an easing of prices over the next five years. It also cut its demand growth projection for 2011-2016 by 500,000 barrels per day (bpd) compared to its previous report and cut its 2013 demand outlook by 100,000 bpd, citing lower consumption in Europe, the Americas and China.
China's annual growth probably slowed for a seventh straight quarter in the July-September period to the weakest level since the depths of the global financial crisis, a Reuters poll showed. The median forecast of 26 analysts is for the economy to expand 7.4 percent from a year earlier, down from 7.6 percent in the second.
"China's Q3 GDP will be the focus to gauge how weak domestic growth actually is," analysts at ANZ said.
But increased confrontation between Turkey and Syria put the brakes on declining prices as it threatens to worsen a geopolitical crisis the whole region is already coping with due to Iran's disputed nuclear programme.
In the latest development, Turkey has banned all Syrian aircraft from its air space. Tensions between the two have worsened in the past two weeks because of cross-border shelling and touched a low when Ankara forced down a Syrian airline.
"Oil markets should continue to swing between tight supply concerns and slowing global demand this week," the ANZ analysts said. "Crude prices are expected to move lower this week unless Middle East tensions escalate."
Brent is expected to fall to $111.85 per barrel as a rebound from $107.67 has finished at $116.02, while US oil could fall to $88.30 per barrel, according to Reuters technical analyst Wang Tao. - Reuters