30 January 2014, News Wires – Brent futures rose towards $108 per barrel on Thursday as bitter cold across the northern hemisphere boosted heating oil demand, but the US Federal Reserve’s move to trim its monetary stimulus curbed gains.
Weak Chinese manufacturing data and the Fed’s decision to stick with the plan to wind down economic stimulus despite recent turmoil in emerging markets weighed on riskier assets, including Asian shares, Reuters reported.
But oil diverged as a fall in US distillates stocks by more than double what was expected revived hopes of firm demand in a seasonally weak period.
Brent crude had gained $0.05 cents to $107.90 per barrel by Thursday morning, after settling $0.44 cents higher, according to the news wire.
US oil rose $0.19 cents to $97.55 per barrel, having ended down $0.05 cents.
“A weak Chinese economy is a bearish factor for oil,” Ken Hasegawa, a commodity sales manager at Newedge Japan, told Reuters. “But the market is finely balanced right now, with rising crude production being offset by an overall improvement in the global economy.”
The balance means oil will trade in a narrow range, Hasegawa reportedly said.
Brent may stay between $107 and $108.50 per barrel, with the US benchmark holding at the $96.50 to $98.50 level, he added.
The Fed’s move had been widely expected, although some investors had speculated the US central bank might put its plans on hold given the jitters overseas.
A pullback in stimulus will strengthen the dollar, weighing on commodities priced in the currency such as oil.
US distillate stocks fell 4.6 million barrels last week, data from the Energy Information Administration showed, versus forecasts of a decrease of 2.2 million barrels.
Distillate inventories were 116 million barrels nationwide in the week ended 24 January and on the East Coast, which has suffered two cold snaps this month, they fell 3.8 million barrels to 29.5 million barrels, the lowest since April 2008.
The distillates supply squeeze comes against a backdrop of a relatively healthy outlook for US energy, supported by strong crude stocks, high levels of oil production and a fresh peak in exports.
Crude stocks rose by 6.4 million barrels, far more than the 2.3 million barrel build expected in a poll, to 358 million barrels as refinery maintenance began.
Prices also remain supported by concerns over supply disruptions from the Middle East and North Africa.
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