LONDON: Brent crude oil climbed towards $115 per barrel on Monday, buoyed by expectations of economic stimulus measures from the United States, despite worse-than-expected Chinese trade data.
Chinese imports fell 2.6 percent year on year in August, confounding expectations of a 3.5 percent rise. Exports grew 2.7 percent, below forecasts of a 3 percent rise.
But markets are hoping growing signs of economic slowdown in China and in the United States will encourage the US Federal Reserve to pump more money into the economy, a move that could help depress the dollar and boost commodities and oil.
Brent crude futures for October delivery were trading 50 cents higher at $114.75 per barrel by 1110 GMT, after settling up 76 cents on Friday. US crude was trading down 10 cents $96.32 per barrel.
"The market is clearly betting on a third round of quantitative easing from the United States," said Tamas Varga, analyst at brokers PVM Oil Associates in London.
"The Chinese data were pretty bearish as were US jobs figures last week. But it is a twisted logic: bad news can be good news if it leads to a positive policy response. That is what is pushing up prices now," Varga said.
Monday's Chinese data underscored the severity of a slowdown in the world's second-biggest oil consumer and Chinese oil trade figures showed a sharp decline in fuel imports as export growth slowed.
China's crude oil imports fell 12.5 percent in August from a year earlier to the lowest daily rate since October 2010, while implied oil demand in China fell to 8.92 million barrels per day (bpd), underlining flagging domestic demand while the global economic outlook darkens.
Federal Reserve Chairman Ben Bernanke is due to hold a briefing on Thursday after a key policy meeting and some analysts are expecting a signal that the US central bank may soon launch a third round of monetary easing, or QE3.
Since late 2008, the Federal Reserve has bought $2.3 trillion in long-term securities in a drive to spur growth and revive the economy, indirectly pumping billions into asset markets and bringing sharply higher oil prices.
Weaker-than-expected US jobs figures on Friday reinforced expectations of a move towards QE3 sooner rather than later. A Reuters poll of economists after the data showed a 60 percent chance of the Fed launching a fresh round of QE3 at the end of its September 12-13 policy meeting.
Also supportive was the aftermath of Hurricane Isaac, which shut much of the oil and gas production in the Gulf of Mexico. Nearly 14 percent of oil output and 10 percent of gas production remained shut on Sunday, US regulators said.
Geopolitical risks remain as Germany's foreign minister urged Iran on Sunday to make "substantial offers" to restart nuclear talks with world powers and told Israel allowing the Islamic Republic to get the bomb was not an option.
But weighing on prices is evidence that oil supply is increasing in several key centres. North Sea production from key fields is now affected by maintenance work but will return next month and output from the Middle East Gulf is also high.
Oil output by three big Gulf producers saw a net increase of around 400,000 bpd in August as a sharp rise in Kuwaiti output outweighed cuts by Saudi Arabia and the United Arab Emirates (UAE), industry sources said on Friday.
Saudi Oil Minister Ali al-Naimi said on Monday the Kingdom was concerned about rising oil prices but the current high prices were "simply not supported by market fundamentals".
"Saudi Arabia will, as always, take all necessary steps to ensure the market is well supplied and to help moderate prices - and we will meet any additional demand from our customers," Naimi said four days after US officials met to consider a release of emergency oil stocks.
Obama administration officials said last week they were worried a release of crude from US emergency reserves would do little to temper global oil prices, partly driven by tighter supplies of refined fuel such as gasoline.
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