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Brent climbs above $110 on China data, supply concerns

Jacob Gronholt-Pedersen
Sunday, 1 Dec 2013 | 10:12 PM ET

* China PMI held at 18-month high in November

* OPEC output below 30 million bpd in November

* Brent seen at $104.10 a barrel in 2014 - Reuters poll

SINGAPORE, Dec 2 (Reuters) - Brent crude edged above $110 a barrel on Monday after Chinese industrial activity clung to an 18-month high last month and amid continued supply disruptions in Libya.

Oil prices were boosted by data showing manufacturing growth in China, the world's biggest crude importer, held at an 18-month high in November on firm domestic and foreign demand, despite worries the economy is facing a modest slowdown.

"Risk assets came back on with the positive numbers out of China," said Ben Le Brun, a market analyst at OptionsXpress in Sydney. "This could reverberate for a couple of days to support oil prices."

Brent crude for January delivery had risen 53 cents to $110.22 a barrel at 0256 GMT, after finishing down $1.17 in the previous session. U.S. crude was up 47 cents at $93.19 a barrel, after settling up 42 cents on Friday.

China's official Purchasing Managers' Index (PMI) stood at 51.4 in November, unchanged from October and ahead of market forecasts for a reading of 51.1.

"I think there is not too much to worry about on the demand side. It's the supply that is still very much uncertain," said Le Brun.

OPEC OUTPUT LOWER

Oil output at the Organization of the Petroleum Exporting Countries (OPEC) fell in November, remaining below 30 million barrels per day for a second month, a Reuters survey found, due to strikes and protests in Libya and further reductions in Saudi Arabian output.

Protests at Libyan oil fields and terminals limited supplies from the OPEC member. Output averaged 350,000 barrels per day (bpd) in November and by the end of the month was around 250,000 bpd, the survey found, a fraction of the 1.4 million bpd it was pumping earlier this year.

Envoys of Iran and six world powers will meet this week to start working out steps to implement a deal under which Tehran is to curb its nuclear programme in return for some respite from sanctions, a top Iranian negotiator said.

Following an interim deal reached with Iran last month, the U.S. State Department has extended six-month Iran sanctions waivers to China, India, South Korea and other countries in exchange for their reducing purchases of Iranian crude oil.

Libyan and Iranian delegates meet with other OPEC members on Wednesday in Vienna to consider adjusting the group's 30 million bpd production target. With oil well above $100 a barrel the oil cartel is likely to leave the target unchanged, say delegates who attend meetings.

Brent oil prices are expected to come under pressure next year due to ample supplies of U.S. shale oil and slow demand growth, a Reuters poll of analysts forecast.

The monthly survey of 27 analysts projected Brent would average $104.10 a barrel in 2014, down from this year's closing average price of $108.50. Last month's poll saw Brent averaging $105.40 in 2014.

U.S. economic data including third quarter GDP, non-farm payrolls and ISM manufacturing PMI will be a key focus later this week, with the U.S. Federal Reserve poised to reduce its stimulus as soon as it deems the economy is strong enough.

Signs of improved economic conditions in the world's biggest economy could raise concerns the Fed may decide to start tapering stimulus at its next meeting on Dec. 17-18.

(Reporting By Jacob Gronholt-Pedersen; Editing by Richard Pullin)