SINGAPORE: Brent crude held steady above $108 on Monday, after rallying in the previous session, on hopes of steady demand growth as China's oil imports surged while investors weighed the outcome of European leaders' agreement on closer fiscal union.
Investors were assessing if the outcome of the meeting was sufficient to prevent Europe's debt crisis from spreading and hurting the global economy. Silver, base metals and the euro fell over scepticism the agreement would resolve the fiscal woes now engulfing the region's top economies.
Brent crude fell 4 cents to $108.58 a barrel by 0317 GMT, after settling at 51 cents higher. US crude fell 5 cents to $99.36, after settling more than $1.07 a barrel higher on Friday.
"Markets are analyzing, scratching beneath the surface to see what the outcome means," said Ben Le Brun, a market analyst at OptionsXpress. "It's probably not a lot, not a silver bullet, but a step in the right direction."
Optimism over the European leaders' meeting, and news that China planned a new $300 billion vehicle to invest in Europe and the United States, pushed most markets, from global stocks to oil and metals, higher on Friday.
Europe secured a historic agreement to draft a new treaty for deeper economic integration. Yet, the new treaty could take three months to negotiate and may require referendums in countries such as Ireland.
The deal "provides a framework for medium-term improvement in debt levels," said Ric Spooner, chief market analyst at CME Markets, in a report. "However, investors are likely to remain nervous about the risk of near term contagion of the European debt situation."
Providing support to oil prices was weekend data out of China that showed crude imports rose 9 percent from October to 22.96 million tonnes. It was the second highest volume on record when calculated on a daily basis, hitting 5.52 million barrels per day, just short of an all-time high of 5.67 million bpd in September 2010.
CHINA, WEEKAHEAD
This followed data on Friday showing the world's second-biggest oil consumer processed a record 9.22 million bpd of crude in the same month. On a daily basis, it was up 5.5 percent, nearly 480,000 bpd higher than the 8.74 million bpd recorded in October.
"It is a very, very positive factor for the market given that China is the second biggest consumer of oil," Le Brun said.
Top oil exporter Saudi Arabia surprised markets last week by saying that it had boosted output to over 10 million bpd to feed increased demand from consuming countries.
The International Energy Agency (IEA) said a boost in Saudi production would provide "welcome" relief to rising oil prices, warning continuing hikes threatened to thwart global economic recovery efforts.
"OECD stock levels are at historically low levels, plus we are in a very fragile economic recovery situation," IEA chief economist Fatih Birol told a seminar in Australia on Monday.
Oil prices were also supported by supply concerns from the Middle East. Fighting overshadowed the first meeting on Saturday of Yemen's new unity government, while France called on world powers to "save the Syrian people" as it joined the United States and Britain in raising an alarm that President Bashar al-Assad's forces may be about to storm the rebel stronghold of Homs.
For the week ahead, investors are expected to pay attention to a series of US data numbers such as retail sales, consumer prices, manufacturing and jobless claims -- aside from headlines out of Europe -- to gauge direction.
Participants are also gearing up for a meeting of the OPEC. The global oil market is balanced, Iranian Oil Minister Rostam Qasemi said on Sunday, calling on some OPEC members to cut back as Libyan output resumes.
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