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Brent rises to $105, touches 8-month low

Japan's economic stimulus expected to enhance liquidity in the markets, data from China and US eyed

Reuters Chennai
Brent crude rose towards $105 per barrel on Monday as Japan's ambitious plan to stimulate the world's third-largest economy is expected to enhance liquidity in the markets, although weak U.S. jobs data kept a lid on gains.

Oil prices are expected to trade in a tight range this week ahead of a spate of economic data from China that will throw light on the pace of recovery in the world's second-biggest oil consumer and its monetary policy.

Brent crude rose 58 cents to $104.70 per barrel at 0427 GMT, after dropping to an eight-month low last week and recording its worst week since June.

 

U.S. crude rose 33 cents to $93.03 per barrel, after logging its biggest weekly loss in more than six months.

"The oil markets are currently enjoying the support of upcoming liquidity after the BoJ announcement last week, but they are still digesting the disappointing jobs data from the U.S.," said Ker Chung Yang, senior investment analyst at Phillip Futures in Singapore.

"The weak undertone will continue until data from China comes out this week."

While an intense burst of monetary stimulus from the Bank of Japan -- which has promised to inject about $1.4 trillion into the economy in less than two years -- will support the outlook for oil, weak data from top consumer the United States will keep gains in check.

American employers hired at the weakest pace in nine months in March, adding 88,000 jobs in March compared with expectations of 200,000, data showed on Friday, stoking worries about the health of the world's largest economy.

"The theme for U.S. economic data for the month of March is likely to be deceleration. In other words, growth and expansion are likely to continue, but at a slower pace than in February," Jason Schenker, president of Prestige Economics said in a report over the weekend.

Support may emerge in coming weeks from China's economic growth data for the quarter ended March 31, which may show continuing evidence of a moderate recovery, with growth expected at 8 percent from 7.9 percent in the last quarter of 2012.

Industrial output growth is also expected to be steady while inflation may have slowed in March, increasing the likelihood that the central bank will continue to maintain a benign monetary policy.

Brent, which has dropped by $15 since hitting a peak in February, may draw support from supply and geopolitical worries after Iran's weekend talks with western powers ended without a resolution, prolonging a stand-off over Tehran's disputed nuclear programme.

U.S. Secretary of State John Kerry said on Sunday world powers would pursue further talks with Iran, but stressed that the process could not go on forever.

However, Norway supply worries eased after a last minute wage agreement deal averted a strike that could have disrupted the country's oil and gas industry as well as supplies.

Norway is the world's seventh largest oil exporter and second biggest piped gas supplier, and a strike last year pushed global oil prices up by around $2 per barrel.

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First Published: Apr 08 2013 | 10:04 AM IST

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