12 February 2014, News Wires – Brent crude edged higher toward $109 a barrel on Wednesday, after upbeat Chinese trade data raised optimism of continued growth in oil demand in the world’s second largest economy.
China’s exports beat expectations, rising 10.6% in January from a year earlier, while imports jumped 10%, signalling a reversal of the recent economic slowdown.
Crude oil imports in the world’s biggest net oil importer rose 11.9% in January from a year earlier to a record 6.63 million barrels per day.
“The strong data underpins strength in oil markets and across the whole commodity board,” said Mark Keenan, head of commodities research in Asia at Societe Generale.
“The data is so surprising that there’s an element of checking whether it’s in fact correct at the moment.”
Brent crude for March delivery was 4 cents higher at $108.72 early on Wednesday, after settling up five cents. US crude was up 38 cents at $100.32 a barrel, after closing 12 cents lower.
The US contract was buoyed by data from the American Petroleum Institute (API) showing crude stocks at the key US delivery hub in Cushing, Oklahoma fell by 2.5 million barrels in the week to 7 February.
Expectations of increased demand due to cold weather in the US, especially for distillates, also offered support. Distillates, including heating oil and diesel, fell by 1.5 million barrels last week, the API data showed.
US crude inventories rose by 2.1 million barrels to 362.9 million, the API data showed, although this was lower than analysts’ expectations.
The more closely-watched weekly inventory report from the US Energy Information Administration (EIA) is due later on Wednesday.
Although oil markets had a muted reaction to US Federal Reserve Chair Janet Yellen’s comments on Tuesday that the central bank will stick to a measured tapering of stimulus, the comments would likely support investor sentiment toward risky assets such as oil, Keenan said.
Oil prices also drew support from the EIA revising its world oil demand forecast for this year to 1.26 million bpd this year, 50,000 bpd higher than a its earlier forecast.
The government agency also cut its 2014 forecast for US oil production by 100,000 bpd to 8.4 million bpd and by 100,000 bpd to 9.2 million bpd for 2015.
“Collectively, the recent news provide a reasonable stable foundation for higher oil prices going forward,” said Keenan.
Meanwhile, gains in Brent were capped by expectations of a further increase in Libyan output. The North African nation’s current production is around 600,000 bpd, up from its average rate in January.
Progress in talks between world powers and Iran over the country’s nuclear programme could also weigh on prices. Tough international sanctions over the past two years have cut Iran’s oil exports in half.
Still, President Barack Obama on Tuesday warned of tough action against companies eyeing business with Iran, saying the US would come down like a “ton of bricks” on those that violated sanctions against Tehran.