Singapore: Brent rose towards $109 a barrel on Friday, hovering near a three-month high on hopes of a steady recovery in US demand following strong economic data and reassuring comments from the Federal Reserve on monetary stimilus.
New claims for jobless benefits fell in the world’s biggest economy and key factory data improved, close on the heels of a steep drawdown in US crude stocks for a third straight week.
Yet, analysts caution that the steep run-up in prices — nearly 10% for Brent and 17% for US crude in less than four weeks — may have been overdone given ample supplies.
Brent crude gained 15 cents to $108.85 a barrel by 0238 GMT, and is on track to rise for a third week. US oil rose 5 cents to $108.09, after settling at a 16-month high of $108.04, and is set to end higher for a fourth week.
“There a few key things that have happened in the market recently and one of them is the steep drawdown in crude stocks, which shows someone is buying a lot of oil and that is being used more for production,” said Jonathan Barratt, chief executive of Sydney-based commodity research firm Barratt’s Bulletin.
“But still, the run-up in prices has been steep and is hard to justify fundamentally. Supplies are ample.”
New claims for US jobless benefits fell last week and factory activity picked up in the Mid-Atlantic region in early July, bolstering a view that economic growth could improve after a dismal first half.
Federal Reserve chairman Ben Bernanke, speaking before the Senate Banking Committee, reiterated comments he made on Wednesday to the House Financial Services Committee. He stressed that the timeline for winding down the Fed’s stimulus program was not set in stone.
Bernanke’s latest comments have helped soothe markets after he set off a brief but fierce global market sell-off last month when he outlined the Fed’s plans to curtail its so-called quantitative easing.
Optimism over a revival in demand growth also came from news China has urged local governments to speed up spending this year’s budget to support economic growth as it aims to keep overall policy stable and focus on reforms.
A recent series of weak data from the world’s second-biggest economy had raised concerns global oil demand growth will fail to meet already pared-down expectations.
Prices were also supported by lingering worries of supply disruption from the Middle East. Brent has held above $100 for most of 2012 and this year due to the West’s standoff with Iran over Tehran’s disputed nuclear programme. The civil war in Syria has also supported oil.
Syria is not crucial to global oil supplies, but investors are worried the deadly civil war could turn into a regional conflict.
Britain believes President Bashar al-Assad might survive in office for years and has abandoned plans to arm the rebels. REUTERS