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Oil steady below $98, capped by weak demand

SINGAPORE, September 16, 2014

Brent crude was little changed just below $98 a barrel on Tuesday, holding gains after recovering from its lowest price in more than two years but capped by a soft global economic outlook.

Data reflecting lacklustre manufacturing output performance in the world's two largest economies, the United States and China, stoked demand fears and kept oil prices in check.

November Brent was trading up 3 cents to $97.91 a barrel by 0253 GMT. The October contract which expired on Monday dipped to a 26-month low at $96.21 in its final session.

U.S. crude for October delivery slipped 15 cents to $92.77 a barrel.

"The November Brent contract started today, but we still cannot see any signs that would stop the decline in Brent," said Ken Hasegawa, a commodity sales manager at Newedge Japan.

Weak data from China over the weekend added to the gloom, just days after OECD energy watchdog International Energy Agency (IEA) had revised down its global oil demand growth projections for 2014 and 2015.

China's August factory output grew at its weakest pace in nearly six years, raising fears of a hard landing at the world's second largest economy.

U.S. manufacturing data was also negative as output fell for the first time in seven months in August. However, the U.S. crude price may gain some support from an expected fall in U.S. commercial crude oil and gasoline stockpiles last week.

Crude stocks fell 1.8 million barrels on average last week, according to a preliminary Reuters survey of six analysts conducted ahead of weekly inventory reports from industry group American Petroleum Institute (API) and the U.S. Department of Energy's Energy Information Administration (EIA).

POSSIBLE SUPPORT AHEAD

Lower crude production and possible winter demand, may give the market some support going forward, said Newedge's Hasegawa, referring to a 400,000 barrels per day (bpd) output cut by Saudi Arabia in August.

Russia is also expected to cut exports of seaborne Russian Urals and ESPO crude oil blends by 6.2 percent to 50.17 million tonnes in the last three months of the year from the previous quarter.

Russian Energy Minister Alexander Novak will meet OPEC officials on Tuesday in Vienna, his spokeswoman said.

Looking ahead, investors are eyeing minutes from a two-day Federal Open Market Committee (FOMC) meeting that ends on Wednesday which may provide cues on when it would raise interest rates and how much further the dollar could strengthen and impact commodities prices.

A stronger greenback makes dollar-denominated commodities more expensive for holders of other currencies. – Reuters




Tags: Oil | Brent | weak demand |

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