Brent rises towards $109; but gains capped
Singapore , October 24, 2012
Brent crude futures climbed towards $109 a barrel on Wednesday, snapping a six-day losing streak after economic data from China suggested a strengthening recovery in the world's No. 2 oil consumer.
China's manufacturers saw growth shrink for a 12th successive month in October, but output stood at a three-month high and order books were the most robust since April, preliminary results of a purchasing managers survey showed.
The data helped allay concerns that the global economy may be slowing faster than previously expected, as a recent spate of poor U.S. corporate earnings and outlooks had indicated.
Brent crude had risen 46 cents to $108.71 a barrel by 0239 GMT. It fell for a sixth straight session on Tuesday, when it hit an intraday low of $107.31, the weakest since Sept. 20 and below its 100-day moving average at $107.42.
US oil gained 44 cents to $87.11, snapping a four-day decline. The front-month contract slumped more than 3 percent on Tuesday to touch a session-low of $85.69, the lowest since July 13.
"The PMI data is supportive for commodities and I expect the crude market to be buoyant," said Ker Chung Yang, senior investment analyst at Phillip Futures Pte Ltd.
"The upside for oil has been dampened by global economic concerns in Europe and China. But the upbeat PMI data from China is relieving concerns of slower growth."
Oil prices have been under pressure in the past few days because of a weak demand outlook, although fears of possible supply disruption due to unrest in the Middle East have lent some support.
Faced with weakening revenue, three of the largest US companies, including Dow Chemical Co, warned on Tuesday that they would cut jobs to protect profits.
But technical charts suggest Brent could end its current modest rebound and fall again towards $105.35, while US oil may pull back towards resistance at $87.70, before falling again to $85.19, according to Reuters technical analyst Wang Tao.
Further price gains were capped by data showing U.S. crude oil inventories rose slightly last week, according to the American Petroleum Institute. Crude inventories increased by 313,000 barrels in the week to Oct. 19, according to the API, compared with an analyst forecast for an increase of 1.9 million barrels in total.
"Growing oil stocks and weak demand sentiment appear to have offset Middle East tight supply worries, with a threat by Iran to curtail oil exports in response to tighter sanctions," analysts at ANZ said in a report. - Reuters