Brent drops towards $102
Chennai, May 27, 2013
Brent crude slipped towards $102 per barrel on Monday, extending last week's 2 per cent drop, as a weak economic outlook in a well-supplied market pressured prices.
The outlook for global oil demand growth weakened last week after disappointing data from key consumer China and reports showing ample US inventory, which dragged down Brent from this month's high near $106 per barrel.
"The markets are in a bit of a moderation mode at the moment, and we're seeing cumulative profit taking," said Ric Spooner, chief market analyst at CMC Markets in Sydney.
"The catalyst was the weaker numbers from China last week and the fact that the markets are reasonably comfortable with geo-political risks at the moment," he said, adding that the markets may tend towards the weaker side in coming weeks.
Brent futures dropped 31 cents to $102.33 per barrel at 0354 GMT, following its worst weekly performance in five weeks. US crude shed 68 cents to $93.47 per barrel.
Trading is expected to be thin on Monday as US markets are closed for Memorial Day, while a bank holiday will keep London markets shut as well.
Oil prices came under pressure last week after data that showed Chinese factory activity declined in May for the first time in seven months and US manufacturing grew at its slowest pace since October.
This came after the Federal Reserve Chairman Ben Bernanke spooked markets by hinting that the bank could soon scale back its stimulus programme.
Any signs of reduction in the Fed's asset purchases under its quantitative easing programme may strengthen the US currency and pressure the dollar-denominated commodity lower.
Oil "will find it harder to stay above last week's highs and there's a risk to the downside", said CMC's Spooner, adding that Brent could revisit its April lows of below $100 per barrel.
Data last week also showed stockpiles of gasoline in the US are close to the highest level for this time of year since 1999.
Further cues for oil demand may come from a spate of economic numbers in coming weeks, including the final purchasing manager index (PMI) numbers and China's trade numbers which may shed further light on global economic health and oil demand.
Lack of fresh developments in the Middle East has also allayed supply worries for now, eroding the support that oil prices have been getting from tensions in the region. - Reuters