Brent steadies under $111 as US spending cuts kick in

Brent crude futures nudged higher after dropping more than 7 percent in the past three weeks
By Reuters
Mon 04 Mar 2013 10:42 AM

Brent crude futures nudged higher after dropping more than 7 percent in the past three weeks but stayed below $111 per barrel on concerns a fiscal crisis in the United States and worrying data from China may weigh on oil demand in the top two consumers.

Automatic spending cuts were triggered in the United States on Friday as lawmakers failed to agree on a resolution to prevent them, while China's manufacturing growth cooled in February to a four-month low and a survey showed that Middle East oil output rose.

According to the International Monetary Fund, the cuts could cost the world's biggest oil consumer about 0.5 percent of its economic growth, a factor that would weigh on global oil demand.

The impact will likely be felt in the second quarter, Bank of America Merrill Lynch analysts said in a report on Friday.

"Economic growth and oil demand is, at best, moderate, and there is the possibility of fiscal tightening in the US," said Ric Spooner, chief market analyst at CMC Markets in Sydney.

"Overall, the general outlook for oil markets remains that of moderate demand growth and good supply."

Brent futures rose 10 cents to $110.5 per barrel at 0238 GMT. It is down 7.3 percent from this year's high of $119.17 reached in February. The next target for Brent will be $107.79-$108.16, said Reuters technical analyst Wang Tao.

US crude fell 7 cents to $90.61 per barrel, after briefly falling below its 200-day moving average on Friday. It may slip to $89.47, said Wang Tao.

Supporting prices in the short-term, the UK Brent oil pipeline system remained shut on Sunday as the operator of the Cormorant Alpha platform in the North Sea investigated a leak of hydrocarbons into one of the platform's legs. This is its second closure in seven weeks.

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