Brent stays above $102
Brent crude held steady above $102 per barrel yesterday on optimism over the outlook for demand growth, as China’s Premier Wen Jiabao said the government would step up efforts to boost the economy of the world’s second-largest oil consumer.
Oil has gained for five of the last six days. Prices rallied on Friday after China’s economy expanded in line with expectations, easing concerns a slowdown in Europe was hurting a lot more than expected. Even though growth slowed for the sixth successive quarter, Asian shares and the euro extended their rally yesterday on signs the steps Beijing has taken so far were underpinning the economy.
Brent crude gained 11 cents to $102,51 a barrel by 0520GMT. Prices settled $1,33 higher on Friday, crossing the 50-day moving average below $102 for the first time since April.
US oil fell 36 cents to $86,74 a barrel, after ending $1,02 higher. The contract also pushed above its 50-moving average of $87,50 for the first time since May on Friday.
“Short-term sentiment should be good for oil as well as other risk assets. It is a combination of two factors — China’s growth coming in in line with expectations and hopes for more measures to boost the economy,” said Ben Le Brun, a markets analyst at OptionsXpress in Sydney.
“We are seeing prices come off a bit due to profit-taking. Any dips will face quite strong support levels.”
China’s Wen said efforts to stabilise the economy were working and the government would step up efforts in the second half of the year to increase policy effectiveness and foresight, the Xinhua news agency reported on Sunday. He said the economy was running at a more stable pace of growth.
Prices are also drawing support from hopes Europe’s fiscal crisis will stabilise after Chancellor Angela Merkel said on Sunday she was confident a majority of German lawmakers would back aid for Spain’s ailing banks.
“International risk markets are beginning to reposition for the possibility that the current international economic downturn is bottoming,” said Ric Spooner, chief market analyst at CMC Markets, in a report.
“Confidence, although brittle, has the potential for further improvement against a background of ongoing stimulus initiatives in China and stabilisation of the situation in Europe.”
A fresh warning by Iran to block the Strait of Hormuz, a conduit for 40% of the world’s sea-borne oil exports, if its security is threatened, is also supporting prices.
Tehran will increase its military presence in international waters, said Ali Fadavi, naval commander in Iran’s elite Islamic Revolutionary Guard Corps.
Brent has slipped 20% from the highs for the year touched in March despite concerns over supply disruptions in the Middle East as investors worry about demand growth amid a slowdown in the West.
A slew of announcements over the weekend that have helped improve the supply outlook are, however, capping price gains.