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Brent steady as market weighs economic data

Brent steady as market weighs economic data
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First Published: Mon, Jul 04 2011. 12 22 PM IST
Updated: Mon, Jul 04 2011. 12 22 PM IST
Singapore: Brent crude steadied on Monday, after briefly turning negative, as the market weighed the impact of contrasting economic data from the world’s two biggest oil consumers on fuel demand.
Oil prices rose after European policy makers approved an emergency bailout for Greece and strong US economic data calmed fears over weakening demand.
But soft manufacturing data from China and ongoing concerns over Europe’s debt crisis pared oil’s earlier gains. Analysts also cautioned it was too soon to say the US recovery had overcome the malaise of the first half of 2011.
ICE Brent crude was up 8 cents to $111.85 a barrel by 11:49am, after falling as much as 47 cents. US crude was at $95.25 a barrel, up 31 cents.
“The US data and the euro zone news is helping oil prices today, although with US markets closed for a holiday, trading will be thin and based very much on technicals,” ANZ Bank oil analyst Serene Lim said.
Euro zone finance ministers on Saturday approved a €12 billion installment of Greece’s bailout and said details of a second aid package for Athens would be finalised by mid-September.
The news followed the release of data on Friday showing the pace of growth in US manufacturing picking up for the first time in four months.
Weekly US oil inventory data from industry group the American Petroleum Institute and the government’s Department of Energy will be delayed by a day to Wednesday and Thursday, respectively, due to Monday’s Independence Day holiday.
According to technical charts, Brent crude needs to clear resistance at $113 a barrel before developing a decent rally towards a short-term resistance target at $121.47, while US crude is expected to rise to $98.13 a barrel, says Reuters market analyst Wang Tao.
The US economic data sparked a rally in Asian equities, with Japan’s Nikkei rising near the 10,000 level for the first time in two months while Australian stocks gained 1 percent.
Oil markets will be looking for further signs of economic recovery to counter demand fears, after China’s factory sector grew at its slowest pace in 28 months, data released on Friday showed.
“There are still some headwinds facing the market. Friday’s slowdown in Chinese manufacturing data signals their economy may be coming off the boil in line with the governments tightening of reserve requirements,” said Ben Le Brun, market analyst with CMC Markets in Sydney.
The key US non-farm payrolls report this Friday will be keenly watched by participants for evidence that the economy may be regaining traction, analysts said.
Any signs of a slowdown in China add to investor nervousness because of recent indications of sluggish US economic growth and Europe’s struggles with its debt crisis.
Oil prices were also boosted by a weaker dollar , which lost ground against a basket of currencies as the euro traded near a one-month high in Asia.
The single currency is rallying after Greece avoided a near-term default and on expectations that the European Central Bank will raise interest rates by 25 basis points when it meets this Thursday, analysts said.
The successful sale of 30 million barrels of crude by the US Department of Energy also eased concerns over how the market would absorb the release of emergency oil stocks by the International Energy Agency.
“This is positive news as it implies the market’s readiness to absorb the additional barrels,” said Lim.
Some traders and analysts said the agency’s planned 60 million barrel crude and oil product release has been badly coordinated outside the United States.
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First Published: Mon, Jul 04 2011. 12 22 PM IST
More Topics: Markets | Oil | Commodity | Brent | Dollar |