Crude edged up on Monday, with U.S. oil finishing the session modestly higher, as traders mulled the impact of mixed economic and industry data from the United States and China—the world's top two oil consumers—on worldwide demand.
China's annual GDP growth slowed to 7.5 percent in the second quarter of 2013, the ninth quarter in the past 10 that the rate has fallen, official data showed Monday. However, China's implied oil demand rebounded in June to the highest in four months as refineries returned from maintenance.
In the United States, data showed retail sales rose less than expected in June, adding to signs of a slowdown in economic growth, while a separate report showed the New York Fed's "Empire State" general business conditions index rose, indicating expansion in the region's factories.
"We were lower earlier on the disappointing news out of China, but the market's made substantial gains in the last couple of weeks and it's priced in the three main drivers for the time being," said Gene McGillian, an analyst at Tradition Energy in Stamford, Conn.
"The Fed isn't going to be stepping back on stimulus, there was a 20 million barrel drop in crude oil stocks in the U.S., and events in Egypt are calming down. Now it's a question of what force is going to come in and drive prices higher?"
Brent crude front-month was flat near $109 a barrel, after falling below $108 earlier. The August contract expires Tuesday. U.S. oil settled up 37 cents at $106.32 a barrel, after hitting session lows under $105 earlier in the day.
The bulls are back
Both Brent and U.S. crude have rallied throughout July as U.S. demand appeared to strengthen during the summer driving season, just as production glitches and tensions in Egypt raised doubts about the reliability of international supply.
"We had some profit-taking this morning, but we have a lot of momentum in this market and the momentum favors the bulls," said Stephen Schork, editor of The Schork Report in Villanova, Pa.
Analysts attributed some of the rally to seasonal mismatches.
In a note from Citi Research, analysts wrote: "The crude market is currently trading the peak of refinery throughput and the seasonal trough of North Sea loadings. In other words, this may be the most bullish point of the year for global crude markets."
Citigroup analysts revised upward its 2013 and 2014 price forecasts for crude oil, saying the market looked to be in good shape as refiners emerge from maintenance and global "refining throughput heads to its summer peaks."
Citi Research raised its 2013 average price forecast for West Texas Intermediate crude to $95.90 a barrel from $90, and its 2014 forecast to $91.80 from $83. It raised its 2013 Brent crude price forecast to $105.30 a barrel from $104, and its 2014 forecast to $97.50 from $93.
Until Thursday, U.S. crude had been outperforming Brent for nine of 10 sessions, narrowing Brent's premium to U.S. crude to a 2½-year low of $1.32 on Thursday. It has since widened out to around $3.
Dow Jones Newswires, citing unnamed sources, reported Monday that the Organization of the Petroleum Exporting Countries could cut its 30 million barrel-per-day (bpd) production by 500,000 bpd in December, which traders said also may have bumped Brent a bit.
"That may have had a little impact on Brent crude, but it's a long time until December, and OPEC will often send out trial balloons by unnamed sources and see how the market reacts," said Phil Flynn, an analyst at Price Futures Group in Chicago.
Hedge funds and other large speculators have piled in to catch the upside. Data from the IntercontinentalExchange showed Monday that speculators increased net long positions in Brent crude oil futures in the week to July 9.
On Friday, U.S. Commodity Futures Trading Commission data showed money managers boosted their net long U.S. crude oil futures and options positions to the highest since record bullish bets were set two years ago.
--By Reuters, with CNBC.com.