Singapore: Brent crude rose toward $112 a barrel on Thursday, extending gains for a third day on persistent worries over supply from Iran, while upbeat global manufacturing data also boosted appetite for riskier assets.
Factory activity rose in the United States, China and Germany -- world’s three manufacturing superpowers -- in January, raising hopes the global economy will not be dragged down by the euro zone debt crisis and pushing up Asian shares as well as the euro.
ICE Brent crude for March rose 33 cents to $111.89 a barrel by 09:30 am and US crude was at $97.58, down 3 cents.
“We’ve got a bullish bias and the Chinese PMI data was supportive of that,” said Jonathan Barratt, chief executive of Barrattsbulletin.com.
“The world was expecting a bigger fallout in China and India from the euro zone crisis. It’s still a big concern but the market wants to focus on the good story.”
Asian shares were up and the euro rose against the greenback on easing concerns over global growth.
A weaker greenback makes dollar-denominated oil more affordable for holders of other currencies.
Yet, even as China defied expectations that its factory output would contract in January and German output improved for the first time in four months, the data released on Wednesday showed new signs of the threats from Europe’s troubles.
New export orders fell in China, and manufacturing in France and several other European nations contracted. Investors are now eyeing employment data due from the United States for cues on the country’s economic health.
Iran Supply Worries
US lawmakers are considering a bid to force President Barack Obama’s administration to blacklist Iran’s President Mahmoud Ahmadinejad and the country’s supreme leader, Ayatollah Ali Khamenei, in an effort to thwart Tehran’s nuclear capabilities.
The fresh penalties would build on a new oil embargo by Europe and sanctions by the United States that seek to shut down Iran’s main clearinghouse for oil revenues, the Iranian central bank.
“It is a stalemate that will continue to squeeze Iran,” Barratt said. “It’s against everyone’s interest to have a conflict as they don’t want to see crude at $140-$150.”
The US sanctions have put top crude buyers in Asia in a quandary. South Korea and Japan, heavily dependent on imports, will seek clarification from Washington on how much oil they can buy from Iran under the new law.
US crude prices came under pressure on Wednesday after crude inventories jumped more than 4 million barrels last week, against an expected build of 2.4 million barrels. Gasoline demand fell to an 11-year low.
“The data confirmed expectations that abundant supplies and the abnormally warm winter have had a negative impact on demand,” ANZ analysts led by Mark Pervan wrote in a note.
A steep 1.5-million-barrel increase at the Cushing, Oklahoma, delivery point for the New York Mercantile Exchange’s oil futures contract, contributed to a jump in Brent’s premium against West Texas Intermediate crude, analysts said.
The WTI/Brent spread was at $14.32 on Thursday, after rising to its highest since 15 November in the previous session.