Tuesday 24 December 2024
 
»
 
»
Story

Brent steady above $108 on demand growth hopes

Singapore, July 19, 2013

Brent held above $108 a barrel on Friday, hovering near a three-month high on hopes of a steady recovery in U.S. demand following strong economic data and reassuring comments from the Federal Reserve on monetary stimulus.

New claims for jobless benefits fell in the world's biggest economy and key factory data improved, close on the heels of a steep drawdown in U.S. crude stocks for a third straight week, supporting oil price gains.

But analysts said the sharp rally in prices, nearly 10 percent for Brent and 17 percent for U.S. crude in less than four weeks, may have been overdone given ample global supplies.

Brent crude climbed to an intra-day high of $108.93 per barrel and was unchanged at $108.70 a barrel by 0641 GMT. The benchmark, which hit a three-month peak of $109.72 on Tuesday, is also mostly unchanged for the week. U.S. oil fell 12 cents to $107.92, after settling at a 16-month high of $108.04, and is set to rise for a fourth week.

"There a few key things that have happened in the market recently and one of them is the steep drawdown in crude stocks, which shows someone is buying a lot of oil and that is being used more for production," said Jonathan Barratt, chief executive of Sydney-based commodity research firm Barratt's Bulletin.

"But still, the run-up in prices has been steep and is hard to justify fundamentally. Supplies are ample."

DEMAND GROWTH

Oil prices, and that of other riskier assets, have been boosted by Federal Reserve Chairman Ben Bernanke's testimony before Congress in which he reiterated that the Fed would only start phasing out its stimulus once it is sure the economy is strong enough to stand on its own.

This helped soothe markets, which saw a brief but fierce global market sell-off last month when Bernanke outlined the Fed's plans to curtail its so-called quantitative easing.

The combination of Bernanke's comments and strong data from the world's top consumer of oil have pushed the U.S. contract higher, narrowing its discount to the European marker.

The spread touched an intraday low of 51 cents a barrel on Thursday, the narrowest spread since 2010.

"Higher equity markets, supportive economic data and declining crude stocks all proved positive for WTI this week," analysts ANZ said in a note.

Optimism about a revival in oil demand growth also came from news China has urged local governments to speed up spending this year's budget to support economic growth.

A recent series of weak data from the world's second-biggest economy had raised concerns global oil demand growth will fail to meet already pared-down expectations.

Prices were also supported by lingering worries about supply from the Middle East.

Brent has held above $100 for most of 2012 and this year due to the West's standoff with Iran over Tehran's disputed nuclear programme. The civil war in Syria has also supported oil.

Syria is not crucial to global oil supplies, but investors are worried the civil war could turn into a regional conflict. In the latest development, Britain believes President Bashar al-Assad might survive in office for years and has abandoned plans to arm the rebels. – Reuters




Tags: Brent | Singapore | Syria | demand | Stimulus | Crude stocks |

More INTERNATIONAL NEWS Stories

calendarCalendar of Events

Ads