Brent gains on promising China data
Singapore, August 9, 2013
Brent crude inched up on Friday to trade near $107 a barrel, after settling at its lowest in more than a month in the previous session, as further data from China added to early signs that the world's top energy consumer may be stabilising.
Although an imminent rebound in the world's No.2 economy is still unlikely, steady consumer inflation in July and a slight easing in producer price deflation held out some hope to markets already buoyed by Thursday's strong trade numbers.
There was an overwhelming improvement in China's commodity imports in July, with crude oil, iron ore and soybean shipments all climbing to record highs.
"The markets are probably underestimating the underlying oil demand in China because of all the recent policy changes that they had," ANZ analyst Natalie Rampono said, adding that the country's crude imports are expected to further rise in the second half as new refineries come online.
Brent crude for September delivery was at $106.95, up 27 cents, by 0543 GMT, after settling at its lowest since July 4. US crude was at $104.01, up 61 cents, snapping five days of losses -- its longest losing streak this year.
Despite the price rebound on Friday, both benchmarks are set to post a weekly loss as investors took profits ahead of September, when the U.S. Federal Reserve is expected to start paring back its massive stimulus programme.
"The market is factoring in a September pullback in the Fed's asset purchase programme," Rampono said. "There could potentially be more profit-taking."
The Fed's move could tighten liquidity that has underpinned global markets, leading to a firmer dollar and weighing on commodities priced in the greenback by making them more expensive for holders of other currencies.
Oil prices could correct this month as speculators liquidate long positions that have hit record highs, said Yusuke Seta, a commodity sales manager at Newedge Japan.
US crude could fall further to $102.50, while Brent is caught in a tight range between $105.40 and $108.20, he said.
The US Federal Reserve will likely begin cutting back on its stimulus next month as long as economic data continues to improve, a top Fed official known for his opposition to the programme said on Thursday.
Traders are also watching the unrest in Libya and the hurricane season in the Atlantic which could disrupt oil supplies further and boost prices.
Workers' protests have already slashed Libya's oil output to the lowest levels since the 2011 civil war and more than halved its exports.
In the United States, the 2013 Atlantic hurricane season is still on track to be "above normal" but "extreme levels of activity" are less likely, a climate agency said. -Reuters