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Mon 6 Aug 2012 09:14 AM

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Brent slips toward $108 after recent gains; data, stimulus eyed

Brent crude dropped toward US$108 a barrel on Monday as a recent surge in prices gave some investors a chance to sell their holdings for profit

Brent slips toward $108 after recent gains; data, stimulus eyed

Brent crude dropped toward US$108 a barrel on Monday as a recent surge in prices gave some investors a chance to sell their holdings for profit, while more data was eyed for clues on the health of the global economy and the outlook for oil demand.

Oil prices jumped on Friday on better US jobs data and talks of stimulus measures by the euro zone to support growth. Supply disruptions in the North Sea and the Middle East also aided prices although Sudanese crude exports could resume soon as Sudan and South Sudan reached a deal on oil transit fees.

Brent crude fell 47 cents to US$108.47 a barrel by 0250 GMT after jumping nearly 3 percent on Friday. US crude edged down 23 cents to US$91.17 after surging close to 5 percent in the previous session.

"Prices did rise quite a lot so it's probably profit-taking going on," said Michael Creed, an economist at the National Australia Bank.

US employers hired the most workers in five months in July, but an increase in the jobless rate to 8.3 percent kept prospects of further monetary stimulus from the Federal Reserve on the table.

Expectations for more stimulus measures from the euro zone to support the debt-laden region and the latest pledge by China, the world's top energy consumer, to step up monetary policy fine-tuning were also helping to keep a floor under oil prices.

"There is a greater degree of optimism in commodities surrounding the euro zone than 2 to 3 weeks ago," Creed said.

"We are still awaiting details regarding what Draghi meant by he'll do anything to maintain the euro."

Data due from China this week are likely to show the world's second-largest economy is, at best, stabilising rather than recovering briskly.

On the supply side, a fall in North Sea output due to maintenance and lower exports from Iran on tight Western sanctions have shored up oil prices.

But Sudanese oil exports may resume soon as Sudan reached a deal with South Sudan on oil transit fees, a first step towards ending a dispute which had brought the hostile neighbours close to war. But Sudan also said it wanted a border security agreement before oil flows resumed.

Disputes between the countries have reduced Sudanese crude exports by about 350,000 bpd from early this year.

Investors are also watching the approach of Tropical Storm Ernesto which kept on a westerly course in the Caribbean Sea on Sunday and was expected to strengthen slowly over the next 48 hours.

Forecasters expect Ernesto to move into the southern Gulf of Mexico by Thursday but it was too early to know whether it could disrupt oil and gas operations in the gulf.

"Brent is testing a longer term resistance at around the US$109 a barrel," ANZ analysts said in a note.

"A shift in Ernesto's course could prove a catalyst for Brent to rally towards US$111 and for WTI to break up toward US$94."

Money managers cut their net long US crude futures and options positions in the week to July 31, the US Commodity Futures Trading Commission said.

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