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Brent Rises on Signs of Chinese Demand

Monday, 10 Dec 2012 | 3:43 PM ET
Offshore oil drilling platform
Richard Ross | Image Bank | Getty Images
Offshore oil drilling platform

Brent oil prices rose slightly on Monday after Chinese data showed oil imports increased last month, a sign of robust demand for commodities in the world's No. 2 oil consuming country.

Chinese customs data showed imports rose to 5.69 million barrels per day last month, which tried for the third-highest monthly level ever and was up 3 percent from year-earlier figures. Iron ore imports also rose, and China's oil refinery runs reached a record last month above 10.1 million barrels a day.

The data helped boost expectations for steady global demand among oil traders. Brent crude's gains ended a five-day slide for the global benchmark, while U.S. crude futures fell slightly in afternoon trading, after being higher most of the day, as forecasts showed unseasonably warm weather that could limit demand for fuel.

"The (Chinese) figures are another confirmation that Chinese oil demand is accelerating again, and there are good reasons to expect that it will carry on growing strongly next year," said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.

Optimism about Chinese growth was tempered by customs data released there on Monday that showed the country's exports expanded less rapidly than expected last month.

Brent crude rose 31 cents to settle at $107.33 per barrel, while U.S. oil futures fell 37 cents to $85.56 per barrel, posting a fifth day of losses.

The divergence widened the spread between the European and U.S. benchmarks to around $21.70 a barrel, from as narrow as$20.45 last week.

Meteorologists forecast mild U.S. weather over the next week, particularly for the eastern half of the country, potentially curbing demand for heating.

"With the warm (U.S.) weather ... you can see heating oil and natural gas futures both lower today," said John Kilduff of hedge fund Again Capital in New York.

European Worries

Exports from Europe's industrial powerhouse Germany rose last month by 0.3 percent, after they had contracted by 2.4 percent in October, German data showed on Monday.

But political uncertainty in Italy helped limit oil price gains by keeping concerns about the euro zone's debt and economic growth in focus.

Italian borrowing costs soared and share prices tumbled on Monday after Prime Minister Mario Monti, an economist respected by investors, said on Saturday he would quit once Italy's 2013 budget is approved, after losing the support of ex-Prime Minister Silvio Berlusconi's center-right PDL.

China's Mixed Index

China's oil refinery throughput rose in November by 9.1 percent from the same month of 2011.

But while increased imports and refining boded well for China's domestic economy, the country's export growth slowed to a lower-than-expected 2.9 percent in November, a customs report said on Monday.

Also, on oil traders' radar, U.S. Federal Reserve policymakers start a two-day policy meeting on Tuesday against the backdrop of U.S. budget negotiations, with many economists expecting the Fed to announce a fresh round of bond purchases to stimulate the economy in 2013.

On Sunday, U.S. President Barack Obama met with Republican House leader John Boehner for talks on a budget deal to avoid the so-called U.S. fiscal cliff, which could trigger tax increases and spending cuts in 2013.

Neither the White House nor Boehner's office made comments on the contents of the meeting.

A deal must be reached before Jan. 1 to avoid the fiscal cliff.

International benchmark Brent oil would need to end the month above $107.38 per barrel to post a gain for 2012.

Oil investors also await comments on supply outlook from the Organization of the Petroleum Exporting Countries meeting on Wednesday.

The producer group is not widely expected to cut its output target of 30 million bpd, in place since 2011. Despite relatively high global oil stockpiles and slowing demand growth, Brent prices have remained over $100 a barrel, partly due to political tensions in the Middle East and the threat of supply disruptions.

Oil traders said Brent also retreated from Monday's high -- of $108.54 per barrel -- after ExxonMobil lifted a force majeure on loadings of Qua Iboe crude from Nigeria following export delays caused by earlier flooding.

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