BackOil holds above $119; China offsets US, Europe
Oil holds above $119; China offsets US, Europe
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London: Oil held above $119 a barrel on Tuesday as economic expansion in China helped counter a sluggish US economy and bubbling euro zone debt crisis that could depress demand for fuel.
The world’s no. 2 oil consumer is expected to account for nearly half of global incremental oil demand this year.
Brent crude edged up 9 cents to $119.56 a barrel by 02:00 pm. US crude ticked up 3 cents to $104.90.
“China is still in an expansionary phase and we saw a slight tick-up on the month," said Ben Le Brun, a Sydney-based market analyst at OptionXpress. “That will offset that negativity we saw filtered through from Europe last night."
But debt woes in Europe continued to cast a pall over the region’s economies, with Spain, the fourth-largest economy in the euro zone, sinking into recession in the first quarter.
In the United States, where the economy slowed going into the second quarter, spending increased only modestly last month and a gauge of Midwest business activity fell sharply.
Higher Opec output in April as well as analysts’ expectations for a sixth weekly rise in US crude inventories due in part to rising domestic production could also weigh on prices.
Opec’s April output was at its highest since 2008 as extra crude from Iraq and Saudi Arabia helped make up for tighter sanctions on Iran, whose own oil output sank to the lowest in two decades, a Reuters survey found.
Iraq’s crude exports rose to 2.508 million barrels per day (bpd) in April from 2.317 million bpd in March as new offshore export terminals helped increase sales, the head of its State Oil Marketing Organisation said on Tuesday.
“Unless Opec curtails production - which we see as unlikely in today’s elevated price environment - inventories should build above-normal through the third quarter," said Morgan Stanley.
“A diplomatic solution to Iran’s nuclear ambitions or a coordinated SPR (strategic petroleum reserves) release, both of which are increasingly possible, may also present additional downside."
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