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Brent slips towards $110 on U.S. fiscal worries

Source : REUTERS
Last Updated: Mon, Mar 04, 2013 08:59 hrs
A worker turns a valve to release drilled oil, near the Dead Sea

Brent crude futures slipped towards $110 per barrel on Monday, extending their more than 7 percent drop of the past three weeks, hurt by concerns a fiscal crisis in the United States and worrying data from China would sap demand in the top two consumers.

Automatic spending cuts were triggered in the United States on Friday as lawmakers failed to agree on a resolution to prevent them, while China's manufacturing growth cooled in February to a four-month low.

Brent futures had fallen 20 cents to $110.20 per barrel at 0754 GMT. They are down 7.3 percent from this year's high of $119.17, reached in February.

The next target for Brent will be $107.79-$108.16, said Reuters technical analyst Wang Tao.

U.S. crude declined 40 cents to $90.28 per barrel, after briefly dropping below its 200-day moving average on Friday. It may slip to $89.47, said Wang Tao.

According to the International Monetary Fund, the U.S. spending cuts could cost the world's biggest oil consumer about 0.5 percent of its economic growth, a factor that would weigh on global oil demand.

The impact will likely be felt in the second quarter, Bank of America Merrill Lynch analysts said in a report on Friday.

"Economic growth and oil demand is, at best, moderate, and there is the possibility of fiscal tightening in the U.S.," said Ric Spooner, chief market analyst at CMC Markets in Sydney.

"Overall, the general outlook for oil markets remains that of moderate demand growth and good supply."

Crude output from the 12-member Organization of Petroleum Exporting Countries (OPEC) rose to 30.32 million barrels per day in February from 30.21 million in January, the first climb since October, a Reuters survey showed.

Supporting prices in the short-term, the UK Brent oil pipeline system remained shut on Sunday as the operator of the Cormorant Alpha platform in the North Sea investigated a leak of hydrocarbons into one of the platform's legs. This is its second closure in seven weeks.

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