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Markets

Brent gains on China data, Iran tension

LONDON: Firm Chinese economic data and brewing tension between Iran and the West pushed Brent crude higher on Wednesday.
01 Feb 2012

 LONDON: Firm Chinese economic data and brewing tension between Iran and the West pushed Brent crude higher on Wednesday.

Brent crude rose 70 cents to $111.68 a barrel by 0915 GMT. It was just below its 200-day moving average of $111.77, a source of technical resistance.

US crude gained 51 cents to $98.99 a barrel.

China's official Purchasing Managers' Index showed the manufacturing sector expanded modestly in January, with the index reading inching up to 50.5 from 50.3 in December, above a 49.5 reading forecast.

Leading US lawmakers are considering adding measures to a new package of sanctions that would single out Iran's national oil and shipping companies and restrict its ability to tap into electronic banking services.

"The tension is keeping a floor under prices, and ongoing signs that China is not going to have a hard landing is giving support to the black stuff," said Michael Hewson, analyst at CMC Markets.

The United States imposed the harshest sanctions so far on Iran when President Barack Obama on Dec. 31 signed into law new sanctions on transactions involving Iran's central bank while the European Union last week imposed a ban on the import, purchase or transport of Iranian oil.

Iran is feeling the bite from economic sanctions imposed over its nuclear program, which is capable of producing a weapon although Iranian leaders have not yet decided to do so, US intelligence chiefs told Congress.

Besides Iran, a dispute between Sudan and South Sudan on oil transit fees dragged on, adding to supply concerns. The newly independent South Sudan has shut production estimated at 350,000 barrels per day (bpd).

DOUBTS REMAIN

While China's PMI data was relatively strong, the Finance Minister warned that the country, the world's top energy consumer, faces downward risks in 2012, as the weakening external demand add more difficulties to the growth of the country's export sector.

Worries about the euro zone debt crisis and slowing growth in the United States continue to weigh on investors' sentiment.

Euro zone manufacturing activity declined for a sixth month in January as a slight upturn in Germany failed to offset a prolonged contraction in the bloc's smaller economies, a survey showed on Wednesday.

Near-bankrupt Greece must make "difficult" decisions in the coming days to clinch a debt swap agreement and a 130 billion euro bailout package needed to avoid an unruly default, the government said on Tuesday.

In the United States, data showed home prices dropped more than expected in November, while consumer confidence soured in January.

US oil stocks data scheduled to be released on Wednesday also offer clues to demand from the world's largest oil consumer.

"The report is bearish given the build in crude oil and the rebound in crude oil imports," said John Kilduff, partner at Again Capital LLC in New York.

"Refinery utilisation remained basically unchanged making the build in distillates impressive and the smallish gasoline draw a non-factor."

Copyright APP (Associated Press of Pakistan), 2012