Singapore: Brent crude futures fell further below $112 a barrel on Friday after faster-than-expected inflation in China eased investors’ confidence in the growth prospects of the world’s second biggest oil consumer, but output cuts in Saudi Arabia limited the drop.
China’s annual consumer inflation sped to a seven-month high of 2.5% in December, narrowing the scope for further policy easing to aid growth and leading Asian shares to give up early gains.
“China’s inflation was hotter than expected which might add a little bit of downside risk and some investors may be cashing in profits,” said Ben Le Brun, market analyst at OptionsXpress.
Front-month Brent futures shed 26 cents to $111.63 per barrel at 07:30 am, heading for their third weekly gain. US crude rose 6 cents to $93.88 per barrel, poised for their fifth weekly increase.
Oil prices gained support this week from better than expected trade numbers from China, relief after the short-term resolution of the US fiscal crisis and data showing a sharp drop in US crude imports in the last week of 2012.
But the gains in both contracts were smaller than in previous weeks, suggesting underlying concerns. US crude gained less than 1% while Brent added less than 0.5%.
Traders said investors this quarter will focus on further talks between US lawmakers to resolve the debt crisis as well as seeking cues on the global economy amid expectations that world growth in 2013 may be higher than 2012.
A drop in oil supplies from the Middle East may keep prices well supported in the next few weeks.
Organization of the Petroleum Exporting Countries’s (Opec) top producer slashed oil production by 700,000 barrels per day (bpd) to 9 million bpd during the last two months of 2012, according to industry sources. Major customers for Saudi crude said the cuts were driven by lower demand.
Saudi Arabia says it favours an oil price of about $100 a barrel, but recent reports suggested that the market is well supplied and that output from North America will grow rapidly over the next two years.
Flows of oil through Yemen’s main crude export pipeline have stopped again after it was blown up by unknown attackers on Thursday morning, government and oil industry officials said.
Yemen resumed oil pumping on 31 December at a rate of around 70,000 barrels per day (bpd) after the latest repairs to the pipeline which used to carry around 110,000 bpd of Marib light crude to an export terminal on the Red Sea before a spate of attacks began in 2011.
Oil prices may also get a boost from a brightening global economic outlook.
The euro zone economy will recover later in 2013 and there are already signs of stabilization, the European Central Bank said on Thursday after it unanimously held interest rates at a record low.
China’s export and import growth rebounded more strongly than expected in December, suggesting a rebound in activity in the world’s biggest energy consumer and early signs of an increase in global demand for its goods.
Exports grew 14.1% versus analyst expectations of 4% and November’s 2.9% increase, while imports grew 6% compared with analyst’s forecasts of 3% and November’s zero increase.
In the US, data showed that initial jobless claims rose last week although the jobs market continues to grow at a moderate pace.