Web Sify
Follow us on
Mail
Print

Brent stays above $102, but set for worst week in two months

Source : REUTERS
Last Updated: Fri, Jun 21, 2013 07:39 hrs

By Manash Goswami

SINGAPORE (Reuters) - Brent futures held above $102 a barrel on Friday as investors bought opportunistically after the previous session's steep fall, but a broad market rout triggered by the U.S. Federal Reserve's plans to wind down stimulus capped gains.

Global equities, bond prices and commodities plunged in a sharp sell-off on Thursday, and most markets extended their losses in early Asian trade on Friday. For oil, demand growth concerns following weak manufacturing data from second-biggest global consumer China added further pressure.

Brent crude slipped to as low as $101.88 a barrel before recovering to trade up 45 cents at $102.60 by 0701 GMT. U.S. oil was up 48 cents at $95.62. But both benchmarks were headed for their steepest weekly loss in two months.

"Ultimately, the United States being off the intravenous dip will be a good thing as it will give the economy a chance to stand on its feet," said Ben Le Brun, an analyst at OptionsXpress in Sydney.

"But investors are looking at the near-term impact of a withdrawal in the stimulus. The weak China PMI numbers are also weighing on sentiment in oil."

China's factory activity weakened to a nine-month low in June as demand faltered, adding to data pointing to a sluggish economy and raising the chances the country could miss its growth target of 7.5 percent for this year.

Both Brent and U.S. oil could slip about 4-5 percent from current levels, Le Brun said. Any upside will be capped at gains of about 2-3 percent, he added.

Assets priced in the dollar, like oil, have been pressured by the greenback which has firmed following Fed Chairman Ben Bernanke's comments that the central bank may reduce its bond-buying program with the goal of ending it in mid-2014.

"Oil traded heavy all through the Asia session yesterday, with rallies quickly sold into. As U.S. equities fell and the dollar rallied, this provided a triple headwind for oil," ANZ analysts in a note on Friday.

On Thursday, crude prices posted their biggest daily loss since November with Brent ending down $3.97 and U.S. oil finishing $2.84 lower.

STEMMING LOSSES

But prices may be supported by concerns about a disruption in supply from the Middle East, with the violence in Syria threatening to engulf neighbouring countries.

Iraq warned that Syria's civil war is tearing the Middle East apart and Lebanon's president urged his country's Hezbollah movement on Thursday to pull its fighters out of the conflict.

Syria's turmoil is dragging its neighbours into a deadly confrontation between Shi'ite Iran supporting President Bashar al-Assad and Sunni Arab Gulf nations backing the Syrian rebels.

"The Middle East is still a clear and present danger to oil markets and prices," Le Brun said. "Tensions in the Middle East will continue to put a floor on prices."

(Additional reporting by Jessica Jaganathan; Editing by Himani Sarkar and Muralikumar Anantharaman)




More from Sify:
blog comments powered by Disqus
most popular on facebook
talking point on sify finance