31 January 2014, News Wires – Brent crude futures held near $108 per barrel on Friday after strong US economic data renewed hopes of stronger global demand, but prices are still set to show the first monthly drop in four months on worries over faltering China’s consumption.
The European benchmark is poised to slip 2.6% in January after data this month showed China’s fuel consumption rose at its slowest clip in more than 20 years in 2013, Reuters reported.
Drawing strength from a cold spell and an improving economy, the US contract is set to end little changed, narrowing the difference between the two.
Brent crude slipped $0.15 cents to $107.80 a barrel by Thursday morning, after ending $0.10 cents higher in the previous session.
Trade was thin with a series of markets in Asia closed for the Lunar New Year holiday.
US oil shed $0.23 to $98. The spread held near the lowest settlement price since November 7.
“Global oil growth forecasts continue to get revised upwards, primarily driven by an improving US economy,” Sydney-based OptionsXpress market analyst Ben Le Brun reportedly said.
“That’s a good thing and will underpin oil prices. The markets should get used to the new reality of slowing growth in China.”
Despite strong support, gains in the dollar may put pressure on oil over the next few days, Le Brun reportedly said.
Brent faces support at around $105 and the US benchmark at $97 should they weaken from current levels, he said.
The US dollar traded at one-week highs against a basket of major currencies.
A strong dollar weighs on commodities such as oil that are priced in the currency.
“Oil has been marching to the beat of its own drum, but at the end of the day it is priced in the dollar,” said Le Brun. “So if we see some solid strength in the dollar, it will weigh on oil and other commodity prices.”
The dollar gained partly as US gross domestic product grew at a 3.2 percent annual rate in the final three months of last year.
While that was a slowdown from the third-quarter, it was a far stronger performance than had been anticipated earlier in the quarter.
Oil may also draw support from an improvement in Europe, which is expected to register slow and steady growth, helping offset the slow-down in consumption in China, he reportedly said.
Investors are also keeping an eye on the unfolding geopolitical crisis in Middle East and North Africa, key suppliers of oil to global markets.
Six suicide bombers burst into an Iraqi ministry building, took hostages and killed at least 24 people including themselves on Thursday before security forces regained control, security officials reportedly said.
While in Libya, the country will elect an assembly on 20 February to draft a constitution intended to advance transition to democracy and break political stalemate more than two years after a NATO-backed uprising toppled Muammar Gaddafi.