SINGAPORE: Brent crude futures rose towards $106 on Thursday, recouping some losses as investors seized the opportunity to buy after the previous session saw the biggest plunge in nearly three months, given worries over Middle East supply disruption.
Commodities plunged across the board on Wednesday, on renewed fears Europe's debt crisis would drag on, while crude was weighed down by the absence of action from a meeting of the Organization of Petroleum Exporting Countries (OPEC) to trim output in case oil demand grows slower than expected.
Brent crude gained 83 cents a barrel to $105.85 by 0646 GMT, after settling $4.48 a barrel lower on Wednesday and posting the biggest one-day percentage loss since Sept. 22.
US crude was 21 cents higher at $95.16, after settling $5.19 lower on Wednesday, also the benchmark's biggest one-day percentage loss since September 22.
"We are going to see WTI trade in the $95 to $102 a barrel range weighed between the ongoing economic uncertainty and supply concerns," said Jonathan Barratt, managing director at Commodity Broking Services in Sydney. "Optimism comes after every speech in Europe, but there are clouds still."
Asian shares, base metals and gold fell, while the euro nursed losses after plumbing its lowest in 11 months following a surge in Italy's borrowing costs.
The market view that last week's European Union summit had failed to produce a solution to the crisis was reinforced when Italy had to pay a stinging 6.47 percent on 5-year bonds on Wednesday, a record borrowing cost for the euro era.
"There is still a lot of uncertainty surrounding Europe and that is worrying investors," said Ken Hasegawa, commodity derivatives manager at Newedge Brokerage in Tokyo.
"Although there was an agreement, a lot of countries are involved and they need to get the deal cleared," he said, referring to last week's European summit.
On Wednesday, Brent broke below its 300-day moving average of $107.08 and hit a session low of $104.36, the lowest for front-month contract since Oct. 6. US crude also dropped below the 200-day moving average of $95.98.
Markets also shrugged off data from the Energy Information Administration showing a 1.9-million-barrel drop in US crude stockpiles last week.
"A lot of technical levels, like the 200-day moving average, were crossed and that triggered stop-loss selling leading to such a big fall overnight," Hasegawa said.
Still, gains may be capped after data showed China's factory output shrank again in December following a fall in new orders, entrenching expectations that manufacturers are struggling with waning global demand and tight domestic credit conditions.
The HSBC flash manufacturing purchasing managers' index (PMI), the earliest indicator of China's industrial activity, stood at 49 in December, a modest rise from November's 47.7, but pointing to a monthly contraction in activity nonetheless.
OPEC MEET
OPEC oil producers agreed to an output target of 30 million barrels per day, ratifying current production near 3-year highs, in a deal that settles a 6-month-old argument over supply policy firmly in Saudi Arabia's favour.
But OPEC did not discuss individual nations' quotas, and there was no mechanism in place to cut quotas should already-fragile demand grow less quickly than expected.
With output from Libya recovering after months of civil war and given a lack of a cutback plan, it may be risky to boost supplies amid slowing demand.
"With OPEC agreeing to set a new output target at 30 million barrels per day, broadly in line with the Secretariat's call on OPEC crude for next year, some adjustments to current production allocation between member states will have to be made," analysts at Barclays said in a note.
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