Monday 12 March 2012

Brent crude falls to $125 as China data spur demand worry


Oil fell on Monday for the first time in four sessions, with Brent slipping towards USD 125 as weak Chinese exports raised fears about global demand and offset the support provided by a better outlook for the US economy and Middle East supply concerns.
Traders took profit on oil after last week's gains as China posted its largest trade deficit in at least a decade, fanning concerns that slowing exports from the world's second largest economy will lead to lower fuel demand.
While the deficit raised questions over the global economy's appetite for its goods, China's crude imports and implied oil demand reached record levels in February.
Brent crude fell 51 cents to USD 125.47 a barrel by 0732 GMT and U.S. crude was down 57 cents at USD 106.83. Brent's premium to U.S. crude was at USD 18.64 after settling at USD 18.58 on Friday.
"It's hard for prices to rise sharply higher, although they are well supported because of the Iran situation and better economic data from the United States," said Ken Hasegawa, a Tokyo-based commodity sales manager at brokerage Newedge Japan.
"After the two big events last week, we can see some profit taking."
Speculators cut their net long positions in U.S. crude oil futures and options positions in the week to March 6 for the first time in five weeks as prices fell, data from the US Commodity Futures Trading Commission (CFTC) showed on Friday.
Brent rose 1.88% last week in its sixth weekly rise in seven, after Greece averted an immediate default while employment data improved in the United States, strengthening prospects of better fuel demand in the world's largest oil user.
"Western Europe seems to be swinging into a positive trend, with Greek austerity measures in place and the largest sovereign debt swap in history being all but finalized," Stephen Schork, editor of the Schork Report in Villanova, Pennsylvania.
He added that the Brent-WTI spread may test the 2012 low of minus USD 20.70 a barrel if the market sees encouraging data this week from Germany's economic sentiment survey and UK jobless claims this week.
EYES ON SUPPLY
Investors are still spooked by supply concerns stemming from Iran's dispute with the West over its nuclear program, on top of lower output from Syria, South Sudan and Yemen.
Iranian President Mahmoud Ahmadinejad has launched a fresh tirade against the West, saying the Islamic Republic does not fear military action.
The chairman of the US Senate Armed Services Committee said on Friday an international naval blockade of Iranian oil exports should be considered before any resort to air strikes against the country's disputed nuclear program.
In Syria, U.N.-Arab League envoy Kofi Annan has ended talks with President Bashar al-Assad and left the country with little sign of progress on halting its growing political bloodshed.
OPEC lowered on Friday production by non-OPEC countries in its monthly oil report by 130,000 barrels per day (bpd) from the previous month to a rise of 600,000 bpd this year, due to revisions in forecasts from Syria, the former Sudan and Yemen.
OPEC pumped the most oil in more than three years in February to make up for some of these losses, yet oil prices have surged more than 8 percent this year, raising concerns that expensive oil could hurt global economic growth.
Kuwait's oil minister expressed similar worries on Sunday, saying that current world oil prices are not justified.
"Everyone worries about expensive gasoline in the United States which might hurt economic growth," Newedge's Hasegawa said, adding that prices were unsustainable and could correct in the next few months.
Gasoline prices could peak soon on relatively soft consumer demand and as output will rise after refineries return to operation from seasonal maintenance if crude does not jump soon, a survey of gasoline retailers in the continental United States showed

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