Brent holds above $116 on US data, euro zone optimism

  • Share via facebook
  • Tweet this
  • Bookmark and Share

Brent crude futures held above US$116 per barrel on Wednesday after positive economic data from the United States and Europe bolstered the view that the global economy is on the mend.

The vast US services sector extended a three-year run of growth, boosting riskier assets, while data showing signs of recovery in Europe's business activity also helped calm nerves jarred by fears a potential political turmoil would derail the region's efforts to resolve its debt crisis.

"The markets are now more optimistic about the world economy, so oil prices are heading up, but gradually," said Ken Hasegawa, a commodity sales manager at Newedge in Tokyo.

Brent rose 11 cents to US$116.63 per barrel at 0402 GMT, extending its gains from the previous session when it hit a more than four-month high.

US crude shed 3 cents to trade at US$96.61.

Brent may test US$120 per barrel this month, while US oil may remain under a little pressure, added Hasegawa.

US crude has dropped more than a percent so far this week, versus a mostly steady Brent, as concerns about excess supply at Cushing, Oklahoma - delivery point for the US contract - weigh on the benchmark.

Brent on the other hand has been supported by an expected shortfall in March supply of the four North Sea crude oil grades that underpin the futures contract.

The crisis-ridden euro zone economy appeared to have turned a corner based on data this week.

Markit's Eurozone Composite PMI, based on business activity across thousands of companies, and a good gauge of economic growth, rose in January to a ten-month high of 48.6 from 47.2 in December.

While still below the 50 mark that divides growth and contraction, where it has been since February last year, it has risen for the third straight month.

But there were some troubling signs as well. The data from Germany was strong while France lagged even troubled nations such as Spain and Italy, which means the region as a whole may not be progressing as indicated by the data.

"Concerns over Europe appear to have eased, although problems in the region are still a long way from being resolved and fiscal austerity measures will continue to contribute to soft energy demand throughout 2013," National Australia Bank analysts wrote in a report.

Investors will now be looking out for the European Central Bank's meeting on Thursday and China's trade numbers due on Friday for more clues on the health of the global economy and what it may mean for commodities demand.

US crude inventory data will also be on the radar. Analysts estimated that US commercial crude oil stockpiles rose last week on higher imports and lower refining activity.

Data from the American Petroleum Institute showed that crude stockpiles rose by 3.6m barrels last week, more than the 2.8m barrel rise that analysts had forecast.

Weekly inventory report from the US Department of Energy's Energy Information Administration is scheduled for release later in the day.

The oil markets were monitoring developments in the Middle East, where sanctions-hit Iran has taken delivery of several new tankers from Chinese shipyards, giving it more flexibility to maintain exports.

Iran and world powers announced new talks on Tehran's nuclear programme on February 26, but hopes of progress were tempered when an Iranian official said the West's goal in talking was to undermine the Islamic republic.

Related:
Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

Please post responsibly. Commenter Rules

  • No comments yet, be the first!

Enter the words above: Enter the numbers you hear:

All comments are subject to approval before appearing

Further reading

Features & Analysis
Petroleum producers shift attention from Middle East: Kemp

Petroleum producers shift attention from Middle East: Kemp

Following four decades of war, sanctions, nationalisation and...

Gold industry shifts east as Dubai plans huge refinery

Gold industry shifts east as Dubai plans huge refinery

$60m refinery being built by Kaloti Precious Metals in Dubai...

Dubai gold dealers shun Turkish bars on fear of links to Iran

Dubai gold dealers shun Turkish bars on fear of links to Iran

Trade in Turkish gold bars to Iran via Dubai is drying up as...

2
Most Discussed
  • 16
    Baby NOT on board?

    The people commenting here were all 20 years old when they were born, never cried, never screamed and never ran etc etc.
    more

    Thursday, 21 August 2014 8:30 AM - Amer
  • 7
    Belgium diplomat arrested for pulling veil from Qatari princess

    If its illegal to dress in a certain way why didnt the police do something about it.

    Whereever the Europeans go, they demand that society conforms... more

    Thursday, 21 August 2014 8:37 PM - Ghazi
  • 7
    CEO of Just Falafel to step down

    Just Falafel was a disaster waiting to happen. The food isn't even that good and the focus wasn't on building the brand and operations. Instead they focused... more

    Thursday, 21 August 2014 8:37 PM - milad
  • 23
    World's most pierced man refused entry to the UAE

    Tolerance has its limits everywhere including Dubai and those who considered Dubai a lawless circus were held accountable...so thank you Dubai authorities... more

    Thursday, 21 August 2014 10:51 PM - Khalil
  • 17
    UK looks to close tax loophole on expat landlords

    UK taxes too much and too complicated and time taking and confusing and continuous. Returns, lawyers, HMRC, taxes too much for too little. Not worth the... more

    Sunday, 17 August 2014 12:40 PM - AbdolRahman
  • 16
    Baby NOT on board?

    The people commenting here were all 20 years old when they were born, never cried, never screamed and never ran etc etc.
    more

    Thursday, 21 August 2014 8:30 AM - Amer