Singapore: Brent hovered above $104 per barrel on Thursday, with investors anticipating more US stimulus measures to support growth and on fears that tensions in the Middle East could escalate causing supply concerns.
Data showing the biggest drop in more than a year in US single-family home sales in June, reflecting a sluggish recovery for the housing market, reinforced expectations that the Federal Reserve would act to adopt more quantitative easing to support the economy.
Geopolitical risks also remained a focus amid fears Syria could resort to chemical weapons in its efforts to suppress the 16-month revolt against President Bashar al-Assad.
Brent crude had slipped 24 cents to $104.14 per barrel by 08:30 am, while US crude was down 24 cents at $88.73.
“People are looking towards the possibility of quantitative easing by US as a weaker dollar will be supportive of commodity prices,” said Ric Spooner, chief market analyst at CMC Markets in Sydney. “The risk is to the downside and I think we will need some sort of catalyst to change the direction of Brent prices, be it either the current demand or supply outlook.”
Prices were also supported after European Central Bank Governing Council member Ewald Nowotny said he could see grounds for giving the euro zone bailout fund a banking license that would increase its crisis-fighting firepower.
But ECB President Mario Draghi poured cold water on the idea, while legal problems could also prevent the central bank allowing its European Stability Mechanism rescue fund to tap liquidity operations.
Downbeat Global Outlook
Adding to the downbeat global economic outlook, South Korea’s economic growth slowed more than expected in the second quarter and barely averted a decline, mainly thanks to a tumble in imports, deepening worries about the prolonged crisis in Europe, and slowing growth elsewhere.
In China, nearly a quarter of companies in the country’s export hub of Guangdong province lost money in the first five months of this year on faltering demand, rising costs and financing shortfalls, the official Xinhua News Agency reported.
A spokesman for the Ministry of Industry and Information Technology said on Wednesday that about 17% of China’s industrial companies lost money in the first five months of 2012, below a 25% peak in the 2008-09 global financial crisis.
But a bright spot was seen with some US manufacturers shaking off weak European demand in the latest quarter, with makers of products ranging from bulldozers to cars finding solid demand at home was enough to offset weakness abroad.
US oil inventories
US crude oil inventories rose unexpectedly by 2.72 million barrels last week on sharply higher imports, defying forecasts for a modest drawdown of 700,000 barrels, data from the US Energy Information Administration showed.
Crude imports rose 695,000 barrels per day to 9.59 million bpd, the highest since July 2011. Crude stocks at the NYMEX Cushing hub rose 203,000 barrels to 46.49 million barrels.
Adding to geopolitical tension, Western powers have been calling for Syrian President Bashar al-Assad to be removed from power in the wake of a revolt against his regime, but they now fear he will fight to the end, raising the risk of sectarian warfare spreading across one of the world’s most volatile regions.
Syria confirmed on Monday that it had chemical and biological weapons and said it would use them against external threats, prompting warnings from Washington and Moscow against using the arsenal.