SINGAPORE: Brent crude held steady above $108 a barrel on Monday, drawing support from a brighter economic outlook for top energy consumer China, although investors remained skittish as US talks to avert a year-end "fiscal cliff" dragged on.
Commodities staged their biggest collective gain in two weeks on Friday, led by a rally in oil prices, as data showed China's manufacturing sector expanded in December at its fastest pace in more than a year, reinforcing belief that the world's No. 2 economy was regaining strength.
Brent crude stretched its gains into Monday, rising 13 cents to $108.31 a barrel by 0240 GMT. US crude rose 21 cents to $86.94 and its January contract will expire on Dec. 19.
"We're just seeing a bit of consolidation after that uptick in China data improved sentiment," Ben Le Brun, a markets analyst at OptionsXpress in Sydney.
"The market is looking for the next leg-up and that would have to do around talks involving the US fiscal cliff."
US House of Representatives Speaker John Boehner's offer to accept a tax rate increase for the wealthiest Americans knocks down a key Republican roadblock to a deal on the year-end "fiscal cliff," but a deal has yet to be done, despite the looming deadline.
Failure to avert some $600 billion of tax hikes and spending cuts scheduled to start in January could throw the US back into recession, denting the outlook for demand from the country which is the world's top oil consumer.
"Boehner and Obama may have found some common ground and I'm surprised that we haven't seen an improvement in oil prices," Le Brun said, adding that this could be because trade volume is low during Asian hours.
Investors remained cautious as money managers cut their net U.S crude futures and options positions by 29,449 contracts to 127,751 in week to Dec. 11, the US Commodity Futures Trading Commission said on Friday.
Center>Copyright Reuters, 2012
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