LONDON: Brent crude futures fell below $110 a barrel on Tuesday, paring earlier gains, after weaker Chinese third-quarter economic growth prompted concern about future demand from the world's second-largest oil consumer and as Moody's warned France of a negative outlook.
Brent crude fell by 77 cents to $109.39 a barrel by 0756 GMT, having plumbed lows of $109.00. a barrel. US crude lost 47 cents to $85.91, a day before the front-month November contract expires.
China's annual economic growth eased to 9.1 percent in the third quarter from 9.5 percent in the previous quarter; and slightly below market forecasts of 9.2 percent as tight domestic monetary policy and easing foreign demand crimped activity.
Reuters calculations suggest implied oil demand in China rose just 1 percent in September from a year earlier to about 8.9 million barrels per day, its slowest rate of growth so far this year.
"This morning the focus is on China, GDP was slightly lower than expected and the oil-specific numbers were very disappointing," Olivier Jakob from Petromatrix said.
Trouble in the euro zone showed no signs of let-down with credit agency Moody's warning France it could slap a negative outlook on the country's Aaa credit rating if the costs for helping to bail out banks and other euro zone members stretch its budget too much.
"Risk evaluation is big in the markets after comments from Germany for a quick solution to the debt crisis and weak data from China," said Commerzbank's Carsten Fritsch.
Brent settled $2.07 lower on Monday after Germany's finance minister said an upcoming European Union summit would not produce a quick fix to the euro zone debt crisis.
"Both last night's announcement in Germany and today's Chinese figures have given the market reason to take profits, after unbridled optimism took hold of traders since the beginning of October," Ben Taylor from CMC Markets said.
"It now seems we will not get a resolution on a debt rescue plan by 23rd October (as the market had expected) and China resilience to external issues is showing signs of weakness".
Wolfgang Schaeuble's comments continued to weigh on sentiment, sending Asian stocks and commodities lower on Tuesday.
Brent could fall to $108.81, while US crude may have peaked at the previous session's high of $88.18, and a short-term downtrend may develop, according to Reuters market analyst Wang Tao.
"The downside will look toward technical resistance levels and the day-to-day ups and downs of the European debt situation," said MF Global analyst Tom Pawlicki in a research note.
SUPPLY ISSUES, INVENTORIES
Crude oil prices were supported by lower Angolan crude production expected in December, with sources saying the country will export around 1.69 million barrels per day (bpd) of crude oil in December, from 1.84 million bpd originally scheduled to load in November.
Angolan crude oil is highly prized in Asia for its relatively low content of impurities such as corrosive sulphur compounds, and many of the production streams are regularly sold almost entirely to Chinese buyers.
A Reuters poll ahead of weekly inventory reports forecast a 1.9 million barrel increase in US domestic crude stocks due to a drop in refinery utilization rates and a rebound in imports.
"Unless we see a sudden reversal back up again in refinery utilization, we are likely to see a steady streak of crude oil stock increases and refined products stocks draws," said Peter Beutel, president of Cameron Hanover.
Distillate stocks were projected down 1.4 million barrels and gasoline supplies were seen down 900,000 barrels, while refinery utilization was likely off 0.2 percentage point, the poll showed.
Copyright Reuters, 2011
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