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Wed 9 Nov 2011 09:20 AM

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Brent rises above $115 on China inflation data

Data soothes investor fears of a slowdown in leading global oil consumer

Brent rises above $115 on China inflation data
Brent crude gained 51 cents a barrel to $115.51 by 0413 GMT

Brent crude gained for a fifth day on Wednesday, to stand
above $115 a barrel, as positive Chinese inflation data soothed fears of a
sharp slowdown in the world's second largest oil consumer.

China's annual inflation rate eased to 5.5 percent in
October, a third straight month of decline from July's three-year peak, and
Premier Wen Jiabao said prices have fallen further since then.

"The data is bullish for oil as it indicates that there
will be no hard landing for the Chinese economy," said Gordon Kwan, head
of energy research at Mirae Asset Management in Hong Kong.

Brent crude gained 51 cents a barrel to $115.51 by 0413 GMT,
after settling 44 cents higher on Tuesday at $115, its highest since Sept. 15. US
crude traded 37 cents higher at $97.17 a barrel.

Easing concerns over inflation will give the Chinese
government more room for policy tweaks that can support growth, analysts said.

"Lower inflationary pressure leaves room for further
policy fine tuning. The PBoC has already marginally loosened liquidity by open
market operations in October," said Zhang Zhiwei, a Hong Kong-based
economist with Nomura.

Annual consumer inflation could fall below 5 percent in
November, he added.

Worries about a sharp slowdown in the euro zone also receded
as Italy and Greece inched towards a resolution of their sovereign debt
problems.

News that Italian Prime Minister Silvio Berlusconi would
step down after a new budget law was approved prompted a rise in Asian shares
and copper, while the euro steadied against the dollar. But gold continued to
inch up, as jittery investors sought safe-haven assets.

In Greece, a short-term coalition government will be
announced later on Wednesday following a meeting of party leaders, a government
official said.

Europe's sovereign debt crisis was cited by OPEC as a risk
to expectations for demand growth in the producer group's 2011 World Oil
Outlook.

According to technical charts, Brent will rise further to
$117.50 per barrel, while US oil is expected to extend gains to $98.91 per
barrel, as it has risen far beyond a resistance at $95.42, said Reuters market
analyst Wang Tao.

Concerns of a disruption in supply from Iran stemming from a
dispute over its nuclear programme eased after a United States official said
any sanctions imposed on Tehran were unlikely to target its oil and gas sector
for now.

A U.N. International Atomic Energy Agency report said Iran
had worked on developing a nuclear weapon design and other research and testing
relevant for such weapons.

Following the report, a Chinese state newspaper said that
confrontation between Iran and the West over Tehran's nuclear plans is reaching
"white hot" levels that could trigger a military attack.

But analysts said a supply disruption was unlikely even if a
conflict broke out.

"Unlike during the Arab oil embargo, Iran's economy and
social stability require significant exports of high priced crude, which should
incentivize production, even in the wake of a military confrontation,"
Morgan Stanley analysts said in a research note.

In the United States, crude oil inventories rose only
148,000 barrels last week, industry group American Petroleum Institute said,
compared with expectations of a 400,000-barrel rise in a Reuters survey.

Gasoline stocks unexpectedly fell 1.5 million barrels and
distillate stocks fell 2.9 million barrels, steeper than expectations for a 2
million barrel decline.