SINGAPORE: Brent crude wiped out early losses to trade above $114 per barrel on Monday as a firmer euro supported prices, although worries that a retreat in China's manufacturing activity would dent demand from the world's top energy consumer capped gains.
Prices are expected to be bound in a tight range ahead the outcome of elections in Italy, which investors are keenly watching to gauge what the implications of that would be for euro zone cohesion and appetite for riskier assets.
Oil prices dropped to near multi-week lows earlier in the session as China's HSBC flash purchasing managers' index (PMI) for February slipped to 50.4, down from the previous month's best reading since January 2011. The weak number also weighed on Asian shares and base metals.
Brent gained 42 cents to $114.52 a barrel by 0905 GMT, after sliding to as low as $113.73 -- less than 50 cents away from a three-week low of $113.32 hit last week.
US oil rose 30 cents to $93.43, after falling to as low as $92.96 -- near a more than one-month trough of $92.44 hit in the previous session.
A slightly firmer euro versus the dollar supported oil, which is traded in the greenback.
"Oil will trade in a tight range today till Italy's election results are out," said Ken Hasegawa, a commodity sales manager at Newedge in Tokyo. "Investors want to get a sense how things will unfold in Europe."
Italians finish voting on Monday in one of the most closely watched and unpredictable elections in years, with rising concern that the ballot may not produce a government strong enough to pull Italy from its economic slump.
For the euro zone, the stakes are high. Italy is the third largest economy in the 17-member bloc and the prospect of political stalemate could reawaken the threat of dangerous market instability.
Brent is expected to hover above a support at $113.59 for one more session before breaking this level and falling to $111.97, while US oil may rebound to $94.17, according to Reuters technical analyst Wang Tao.
Hasegawa expects Brent to trade within a tight range of $113 and $115 a barrel over the next 24 hours.
Comments
Comments are closed for this article.