Brent Steadies Around $100 As Economic Worries Hold - Gulf Business
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Brent Steadies Around $100 As Economic Worries Hold

Brent Steadies Around $100 As Economic Worries Hold

Brent has lost nearly 10 per cent since the start of April as growth in the United States and China slowed.

Oil futures steadied around $100 a barrel on Monday, retrieving only a fraction of the ground lost over the past three weeks due to worries about the world economy and the impact on fuel demand.

Brent has lost nearly 10 per cent since the start of April as growth in the United States and China — the world’s two largest oil consumers — slowed, while recession in Europe deepened.

June Brent crude slipped 4 cents to $99.61 a barrel by 0900 GMT after earlier briefly moving above $100 a barrel. U.S. crude for June delivery was up 8 cents to $88.09 a barrel after a 3.6 per cent loss last week.

“Brent failed to gain the $100 per barrel level on Friday so today we are starting with little momentum,” said Oliver Jakob, analyst at Zug, Switzerland-based Petromatrix.

Expectations of weaker demand growth have also hit other commodities, leading to a 1.4 per cent fall in the bellwether Thomson Reuters-Jefferies CRB index last week.

“Are we in the midst of a fundamental reappraisal of oil’s price potential or merely witnessing a temporary loss of confidence? There is a real chance on this occasion that it is the former,” David Hufton of PVM oil brokerage said, citing a tepid global growth forecast, reduced geopolitical concerns and high stocks

“Plenty to be bearish about, therefore, in the absence of a supply interruption, until the price falls to a level which will discourage new oil supply…,” he said.

Technical charts showed that Brent may revisit its April 16 low of $98 a barrel, after it failed to rise past a resistance at $100.47, while U.S. crude could fall to $86.82, Reuters markets analyst Wang Tao said.

Hedge funds and other large speculators cut their net long U.S. crude futures and options positions in the week to April 16, the U.S. Commodity Futures Trading Commission (CFTC) said.

Brent’s fall below $100 prompted comments from oil hawks Iran and Venezuela on Thursday that OPEC could call for an emergency meeting ahead of one scheduled on May 31, although there is no indication of such a meeting yet.

Worries over a sluggish world recovery persisted with finance leaders of G20 economies edging away from a long-running drive toward government austerity in rich nations, rejecting the idea of setting hard targets to cut national debt.

Investors will scour data from China and the United States this week for growth cues. The HSBC Purchasing Managers’ Index for April will be released on Tuesday while the United States will announce first-quarter GDP growth on Friday.

Economists polled by Reuters expect the U.S. economy to have expanded at a three per cent clip, up from 0.4 per cent in the last three months of 2012. Yet, a pair of unexpectedly soft regional Federal Reserve surveys last week reinforced the view that yet another Spring slowdown – the fourth in as many years – is unfolding in the United States.

Iran’s Mehr mew agency reported that Iran and officials from the U.N.’s nuclear watchdog will hold a new round of talks over Iran’s disputed nuclear programme on May 21 in Vienna.

PNM’s Hufton nevertheless played down the impact of tensions over the Iranian nuclear programme on oil markets.

“The Iranian nuclear standoff is a concern but it is constantly being pushed back and the West does not have the appetite for a confrontation,” he said.


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