Font Size

- Aa +

Tue 16 Aug 2011 08:40 AM

Font Size

- Aa +

Brent drops below $110 on weak US data

Manufacturing in New York area contracted for third straight month in August, data showed

Brent drops below $110 on weak US data
oil refinery

Brent crude futures edged down on Tuesday, after rising nearly $2 a day earlier, as soft US economic data renewed fears of weaker oil demand from the world's top oil consumer and a rebound in the dollar spurred selling.

Brent crude for September fell 26 cents to $109.65 by 0357 GMT, after falling to as low as $109.23 earlier. US crude was down 34 cents at $87.54 a barrel.

Manufacturing in the New York area contracted for the third straight month in August, data showed on Monday, tempering any lingering hopes for a rebound in the second half of the year.

The survey is one of the earliest regional guideposts to US factory conditions and analysts said it boded poorly for the larger national survey due at the beginning of September.

Separate US data on Monday showed the housing sector remained weak with a gauge of homebuilder sentiment stuck at historic lows.

"The manufacturing data took quite a hit, and that could account for the weakness," said Ben Le Brun, CMC Markets analyst in Sydney.

"But it seems fears of the worst case scenario for the global economy has receded. We're going to see weaker growth, but growth nonetheless."

Oil prices were also pushed lower by a stronger dollar, which makes commodities priced in the greenback more expensive for holders of other currencies.

The US dollar was trading up 0.12 percent against a basket of currencies . The greenback had fallen to a near three-week low against the euro on Monday.

The market will be watching for a slew of US economic reports that come out this week, including housing starts and industrial production data later on Tuesday, for clues on the health of the world's biggest economy.

Concerns over the US recovery and the ongoing euro zone crisis have dragged down oil prices this month. Brent surged on Monday as hopes for a resolution to Europe's issues rose ahead of a Tuesday meeting between French and German politicians.

The World Bank also called for national governments to seek long-term debt curbs on Tuesday to solve the current sovereign debt crises in Europe and the United States, but said it was too early for special action by the Group of 20 nations.

Brent could move up to $111.30 a barrel after a shallow retracement to $108.20, while a rebound for US oil seems to be stronger than expected and it may continue to zigzag up towards $90 per barrel, Reuters technical analyst Wang Tao said.

The shutdown of a North Sea oil well at a Royal Dutch Shell field after an oil leak looks unlikely to affect supplies significantly from the home of the Brent oil benchmark, oil traders said on Monday.

In the US, crude oil stockpiles are expected to have fallen for a second straight week due to lower imports, a preliminary Reuters poll showed on Monday ahead of weekly inventory data.

Oil prices remain supported by the loss of around 1.6 million barrels per day of production in Libya since the start of an uprising in February.

Forces loyal to Muammar Gaddafi will destroy the oil terminal in Brega to prevent one of the country's most important economic lifelines falling into the hands of advancing rebels, the fighters said on Monday.

"We continue to believe that the return of Libyan crude supplies to the market will be seen in 2012 and as such any sell-off associated with headlines of a regime change in the country provide consumers with a good hedging opportunity," said analysts at JP Morgan in a report on Monday.

In Syria, where a five-month-long street uprising against President Bashar Al Assad's autocratic rule has so far had little impact on the country's 400,000 barrels per day oil production, the military broadened its assault over the weekend to try to put down the protests.