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Brent stays above $109 on upbeat China data

Singapore, September 23, 2013

Brent crude held above $109 a barrel on Monday, paring earlier losses after robust manufacturing data from China lifted the outlook for demand from the world's second largest oil consumer.

China's flash HSBC Purchasing Managers' Index (PMI) climbed to 51.2 in September, hitting a high not seen since March and putting to rest investors' worries of a sharp slowdown at the world's second largest economy.

Brent crude for November delivery edged down 7 cents to $109.15 a barrel by 0309 GMT, off a low of $108.97 hit earlier in the session. US crude for November inched down 3 cents to $104.72 a barrel.

"Chinese manufacturing numbers tend to reverberate across risks assets in 24 hours," OptionsXpress market analyst Ben Le Brun said. "So far the Chinese numbers look good and hopefully, this will be followed by good European numbers."

The euro zone and the United States will also release their PMI data later on Monday.

Oil prices have dropped over the past two weeks, with Brent coming off a 6-month top hit in late August, as fears of a US-led military strike on Syria eased and output from Libya rose after a more than a month long unrest crippled its oil sector.

"There is still an element of a risk premium in oil prices because of Syria but it's nowhere near the levels a couple of weeks ago," Le Brun said.

The United Nations will discuss this week a plan proposed by the United States and Russia to disarm Syria of its chemical weapons. Market participants had been worried that a strike against Syria could spread unrest in the Middle East and disrupt supply from the region that pumps a third of the world's crude.

A positive tone in US-Iranian relations could also weigh on oil prices, which have been underpinned by a plunge in exports by the Opec member amid Western sanctions against Tehran's disputed nuclear programme.

Iranian President Hassan Rouhani is expected to pursue a charm offensive in New York this week aimed at setting the right tone for further nuclear talks with world powers which he hopes will bring relief from sanctions, according to diplomats and analysts.

More oil is also coming from South Sudan as it raised output to the highest level since it resumed oil exports through Sudan following a thaw in their relations.

In the United States, the Federal Reserve kept investors guessing about when it would start paring back its bond purchases after its decision to keep the stimulus programme intact last week took markets by surprise.

Investors are the next Fed meeting in October for any sign of tapering that could strengthen the greenback and make dollar-denominated commodities less affordable for holders of other currencies.

In the next three months, US crude may retrace to $94.89 a barrel, Reuters market analyst Wang Tao said. - Reuters




Tags: China | US | Brent | Syria | Crude | sudan | libya |

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