Brent under $111, curbed by US demand outlook
Singapore, April 2, 2013
Brent crude steadied under $111 a barrel on Tuesday, supported by prospects of stronger appetite in Asia but hurt by concerns over the pace of economic recovery in top consumer the United States.
Saudi Arabia Oil Minister Ali Al-Naimi said on Monday he expected to see a recovery in demand for the kingdom's crude in Asia but stopped short of quantifying the expansion.
China, the world's second-largest oil consumer, imported 1.08 million barrels a day of crude from Saudi Arabia in 2012, up more than 7 per cent from the previous year.
"Fundamentally China is now on a massive drive to expand its refining capacity, and with that comes expansion to oil-related infrastructure like pipelines, storage tanks... so it is only logical to see their demand for oil rise as well," said Tony Nunan, a risk manager at Mitsubishi Corporation in Tokyo.
"On top of all that, Naimi also knows that his crudes are reasonably priced, and that is another reason why he is anticipating demand for Saudi crudes to go up."
Brent crude for May delivery was down 24 cents at $110.84 a barrel by 0423 GMT, while US crude fell 28 cents to $96.79 a barrel.
But investors anticipate more downside pressure on oil markets after disappointing US factory data hinted at flagging economic momentum.
"You see the US economy settling into a long hard grind of moderate growth of around 1 to 1.5 per cent, growth in previous recoveries was closer to 3.5 per cent," said Ric Spooner, chief market analyst at CMC Markets, in Sydney.
"With this kind of growth, the United States is going to struggle to bring down unemployment which is a real drag on the economy."
As Exxon Mobil continued the cleanup of an oil spill in Arkansas, investors expected pressure on the US crude benchmark as they see an inventory buildup in the US Midwest.
Exxon's Pegasus pipeline, which can carry more than 90,000 barrels per day (bpd) of crude to Texas from Illinois, is used to supply US Gulf Coast refineries.
"Any kind of bottleneck will cause weakness in the mid-continent, so you could see some temporary weakness in WTI," Nunan said.
"But this is also the time when US refineries are starting to ramp up in preparation for the gasoline season."
A Reuters poll showed that US commercial crude inventories were forecast to have risen by 2.3 million barrels, while refinery use was expected to have expanded 0.5 percentage points from the previous week's level of 85.7 per cent of capacity. - Reuters