Brent steady near $113; Iran offsets weak euro zone

SINGAPORE: Brent crude prices steadied around $113 a barrel on Monday as weaker euro zone employment and retail sales data boosted the dollar and dented sentiment, but concerns over Iran's threat to shut a key oil-shipping route capped price falls.

February Brent eased 3 cents to $113.03 a barrel by 0333 GMT. On the New York Mercantile Exchange, February crude was down 51 cents at $101.05 a barrel.

The euro zone's November retail sales fell 0.8 percent, much weaker than a forecast in a Reuters poll for a fall of 0.2 percent, while the number of unemployed rose for the seventh consecutive month.

The negative news dragged the euro to a 16-month low against the dollar, while the dollar index against a basket of major currencies rose above 81.40 to the highest since September 2010.

A stronger U.S dollar makes commodities priced in the unit more expensive.

German Chancellor Angela Merkel and French President Nicolas Sarkozy, aiming to align the two powerhouse partners that have driven European integration, will focus on how to boost employment at a meeting later in the day.

"I don't think there are big expectations from the meeting. They have met so many times and achieved nothing," said Ben Le Brun, Market Analyst at OptionsXpress in Sydney.

IRAN RATTLES SABRE

Offsetting the impact of gloomy economic news for oil markets was a Friday announcement from Iran of new military exercises in the Strait of Hormuz, a critical shipping chokepoint.

Iranian officials have in recent weeks threatened to block the strait if new sanctions imposed by the United States and planned by the European Union, with the aim of discouraging Iran's nuclear programme, harm Tehran's oil exports.

"The geopolitical concerns are definitely putting a floor on oil prices at the moment. There are no two ways about that," said Le Brun.

The West has plans to use strategic oil stocks to offset most of the 16 million barrels per day (bpd) of crude passing through the waterway should Iran block it, industry sources and diplomats told Reuters.

The International Energy Agency (IEA) may release up to 14 million barrels per day (bpd) of government-owned oil stored in the United States, Europe, Japan and other importers, a rate that could be kept up for a month.

Copyright Reuters, 2012