Brent crude held steady above US$102 per barrel on Monday on optimism over the outlook for demand growth as China's Premier Wen Jiabao said the government will step up efforts to boost the economy of the world's second-largest oil consumer.
Oil rallied for a third day on Friday after China's economy expanded in line with expectations, easing concerns a slowdown in Europe was hurting a lot more than expected. Even though China's growth slowed for the sixth successive quarter, Asian shares and the euro extended their rally on Monday on signs steps Beijing had taken so far were underpinning the economy.
Brent crude slipped 5 cents to US$102.35 a barrel by 0232 GMT. Prices settled US$1.33 higher on Friday, crossing its 50-day moving average below US$102 for the first time since April.
US oil fell 41 cents to US$86.69 a barrel, after ending US$1.02 higher. The contract also pushed above its 50-moving average of US$87.50 for the first time since May on Friday.
"Short-term sentiment should be good for oil as well as other risk assets. It is a combination of two factors - China's growth coming in in line with expectations and hopes for more measures to boost the economy," said Ben Le Brun, a markets analyst at OptionsXpress in Sydney.
"We are seeing prices come off a bit due to profit-taking. Any dips will face quite strong support levels."
China's Wen said efforts to stabilise the economy are working and the government will step up efforts in the second half of the year to increase policy effectiveness and foresight, the official Xinhua news agency reported on Sunday. He said the economy was running at a slower, more stable pace of growth.
"The economic growth rate is still within the government target range set early this year, and stabilisation policies are working," Wen was quoted as saying.
Prices are also drawing support from hopes Europe's fiscal crisis would stabilise after Chancellor Angela Merkel said on Sunday she was confident a majority of German lawmakers would back aid for Spain's ailing banks.
Fresh warning by Iran to block the Strait of Hormuz, through which 40 percent of the world's sea-borne oil exports passes, if its security is threatened is also supporting prices. Tehran will increase its military presence in international waters, said Ali Fadavi, naval commander in Iran's elite Islamic Revolutionary Guard Corps (IRGC).
Brent has slipped 20 percent from the highs for the year touched in March despite concerns over supply disruptions from the Middle East as investors worry about demand growth amid a slowdown in the West.
A slew of announcements over the weekend that have helped improve the supply outlook are, however, capping price gains.
Yemen's oil minister said on Sunday the country may be able to resume exports as planned this week after tribesmen agreed to allow repairs to the country's main crude pipeline.
The presidents of Sudan and South Sudan on Saturday held their first talks since their countries came close to war in April, raising hopes for a negotiated settlement of oil and border disputes before an August 2 UN Security Council deadline.
The UAE loaded its first cargo on Sunday from its long-awaited new oil export terminal on the Gulf of Oman as Iran renews threats to close the Strait of Hormuz.
Brent will retrace to US$101.26 per barrel as a corrective wave cycle has completed on the rise from the July 10 low of US$97.73 to US$103.44, while US oil will rise to US$88.98 per barrel after a moderate correction to US$86.07 per barrel, according to Reuters technical analyst Wang Tao.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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