12 November 2012, Sweetcrude, LONDON – BRENT crude oil fell below $109 a barrel on Monday as President Barack Obama is trying reaching a deal to avert a looming US fiscal calamity, overshadowing upbeat data from key consumer China.
US tipping into recession became a cause of worry due to the “fiscal cliff” of about $600 billion in expiring tax cuts and spending reductions – scheduled to take effect in January. This has weighed across financial markets, pushing Japan’s Nikkei average to a four-week low and limiting movement in other Asian equities.
Front-month Brent crude slipped 45 cents to $108.95 a barrel early on Monday, snapping two straight days of gains.
US oil was down 17 cents at $85.90, after ending up more than 1% last week following a three-week slide.
Oil prices were also pressured by data showing Japan’s economy shrank 0.9% in July-September from the previous quarter. It was the first contraction in three quarters, suggesting faltering global demand and weak consumer spending may push the economy into a mild recession.
Brent is expected to revisit its 8 November low of $106.12 per barrel as it seems to be consolidating within a triangle, according to Reuters technical analyst Wang Tao.
But losses in oil were checked by data over the weekend showing China’s implied oil demand in October surged.
Implied oil demand in China, the world’s second-largest fuel user, grew 6.5% in October from a year earlier, close to September’s record high as demand was underpinned by fuel inventory building and new production capacity.
“It was encouraging to see an improvement, though it was not really a game changer,” Spooner said, referring to the China data.
China used roughly 9.71 million barrels per day of oil last month, close to September’s record high of 9.79 million bpd, according to Reuters calculations based on refinery output and net imports of refined fuels.
The global oil market is in good shape and Saudi Arabia is happy with the current oil price, Saudi Oil Minister Ali Naimi said, expressing satisfaction over a Gulf Arab effort which kept prices in check.