Brent edges above $107

04 April 2013, News Wires – Brent crude edged up above $107 on Thursday after its biggest fall in five months in the previous session, but prices stayed close to this year’s low as weak data and swelling inventories in top consumer the US muddied the demand outlook.

Wednesday’s slide in oil prices was triggered by a US jobs report that showed less-than-expected hiring in the private sector in March. A spike in US oil inventories to their highest since 1990 triggered further downside pressure, quashing any hopes of a robust recovery in oil demand.

“There is now no shortage of oil in the United States or anywhere else, this is very clear, and we can see that the economic recovery is also not as good as we thought it was,” said Ken Hasegawa, commodity sales manager at Newedge in Tokyo.

“There is more uncertainty ahead. As such, we see more downside pressure on oil prices.”

Brent for May delivery rose 22 cents to $107.33 a barrel early on Thursday, less than a dollar away from this year’s low of $106.78 hit on Wednesday.

Brent slipped more than 3% in the previous session, its biggest daily fall since early November.

US crude edged down 9 cents to $94.36 a barrel, after shedding almost 3% in the previous session for its biggest drop in four months.

Markets are now waiting for key US jobs data on Friday for clues to the health of the world’s largest economy and indications on its appetite for oil.

US crude stocks rose 2.71 million barrels in the week to 29 March, compared with analysts’ expectations for a rise of 2.2 million barrels, data showed on Thursday.

The stocks now total more than 388 million barrels, close to the all-time peak of 391.9 million barrels hit in 1982.

According to a Reuters technical analysis, US crude is expected to extend its losses to $93.57 a barrel, while Brent is seen dipping towards $105.66 a barrel.

The Brent-US crude spread narrowed slightly to $12.95 a barrel from its settlement in the previous session.

Brent’s premium to US crude rose to a more than one-week high of $14.66 on Tuesday, amid concerns a prolonged ExxonMobil pipeline outage in the Midwest could lead to a buildup in stockpiles near the delivery point of the US benchmark contract in Cushing, Oklahoma.

However, oil prices may draw support from supply worries stemming from the standoff between Iran and the West over Tehran’s disputed nuclear programme. Escalating tensions on the Korean peninsula are also in focus.

Investors are anxiously watching the Korean peninsula, after the United States said it was sending a missile defence system to Guam to defend it from any attack from North Korea.

The announcement came just hours before North Korea’s army said it had ratified an attack against the US, potentially involving a nuclear strike, the latest in a series of provocations testing President Barack Obama’s policy of “strategic patience” with Pyongyang.

“We’ve heard this from North Korea before, but that isn’t to say the risk of this escalating beyond rhetoric isn’t there,” said Ric Spooner chief market analyst at CMC Markets in Sydney.

“But what the market will be looking for now will be supplementary signs like the building up of troops on the ground for example, something more concrete before pricing in this risk.”

Talks between Iran and six major world powers on Tehran’s nuclear program set to take place on Friday and Saturday in Almaty, Kazakhstan, are also being watched.

“I don’t expect to see any agreement reached, so it is likely to be status quo,” said Hasegawa.

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