London: Brent crude oil rose to flirt with $104 a barrel on Tuesday, supported by lower than expected Chinese inflation figures as well as unrest in Bahrain and Iran which raised fears of potential supply disruption.
Brent crude for April delivery rose 63 cents to $103.71 a barrel by 2:38pm, after earlier pushing to $104.04 in the session, but still off a 29-month peak of $104.30 reached on Monday.
US crude for March delivery was up 23 cents to $85.04 at the same time, after falling to 2-1/2-month lows in the previous session, pressured by high stockpiles at key delivery point Cushing, Oklahoma.
Oil was bouyed by China’s consumer price inflation coming in lower than expected for January at 4.9%. A Reuters poll had forecast 5.3%. China is the world’s second largest consumer of oil after the United States.
Although some economists expressed caution and suggested Beijing would stick to its course of gradual monetary tightening, the oil market shrugged off these concerns.
“Inflation was lower than initially feared so there is less need for strong tightening and the previous tightening hasn’t had any negative impact on commodity demand from China, as suggested yesterday by the strong impoort data,” said Carsten Fritsch, a commodity analyst at Commerzbank. “I think the fears are much exaggerated.”
China’s crude oil imports for January have risen 27% from a year ago as refiners raise production and beef up diesel inventories to fight a drought.
Fritsch also attributed the oil price rise to the spreading of civil unrest in the Middle East following Egypt’s ousting of president Hosni Mubarak last week.
Police in Bahrain used teargas to break up the funeral procession of a Shi’ite protester killed in clashes on an anti-government “Day of Rage”, witnesses said on Tuesday, and another person was reported to have died.
Iranian lawmakers called for the death penalty for opposition leaders after thousands of opposition activists rallied on Monday in support of popular uprisings in Egypt and Tunisia.
The market also looked towards US January retail sales due at 7:00pm and US weekly crude inventories from the American Petroleum Institute (API) due at 2130 GMT.
A Reuters poll forecast a rise in crude oil stockpiles for the fifth week in a row, to 2.6 million barrels, due to a rebound in imports.
Fritsch said the retail sales could allow the oil market to draw some conclusions about gasoline demand.
The dollar fell 0.15% against a basket of major currencies to 78.498. A weaker US currency is generally supportive for commodities priced in dollars as it makes it cheaper for buyers using other currencies.