LONDON--Brent crude-oil futures fell slightly in London trading Monday, having failed to hold above $119 a barrel at the end of last week, but the move is broadly seen as a brief dip as the grade's near four-week price rally is expected to continue.
At 1035 GMT, the front-month March Brent contract on London's ICE futures exchange was down 47 cents at $118.43 a barrel.
The front-month March light, sweet crude contract on the New York Mercantile Exchange was trading 10 cents lower at $95.62 a barrel.
The $120-a-barrel level for Brent is still within striking distance, said Francis Bray, Dow Jones' chief technical analyst for Europe, with Friday's close at $119.17 a barrel effectively the last line of defense. For WTI, the downside risk is limited from the newly established range of $95.04-$97.23 a barrel, with bulls likely to try to force a break above Friday's $96.57 a barrel.
The two global benchmarks have broadly disconnected again early this year, with the spread--the price differential between the two--widening to over $23 a barrel early Monday.
The tone in the market remains mostly bullish, after strong crude-import numbers from China Friday, with supply uncertainty still very much at the forefront of investors' minds and a lot of speculative demand in the market.
Prices won't fall dramatically "unless speculators are convinced that the event risk upside potential is diluted," said David Hufton, of PVM. With the Iranian nuclear situation unresolved, Syria in meltdown and oil-focused terrorism back on the agenda as the Arab Spring evolves, "there is no dilution in sight," Mr. Hufton said, provided fears of financial meltdown don't resurface.
Actual or perceived supply constraints mean the price of Brent will have to stay high for there to be a downward adjustment in demand, said analysts at Bank of America Merrill Lynch, who warned that Brent could spike to $130 a barrel this year as global gross domestic product growth accelerates in the second half of the year amid limited supplies of oil.
Later Monday, the IntercontinentalExchange will publish its latest commitments of traders report--net speculative long positions in Brent have risen to record levels so far this year. On Wednesday this week, the International Energy Agency will publish its monthly oil market report.
The ICE's gasoil contract for February delivery was down $5.75 at $1,025.00 a metric ton, while Nymex gasoline for March delivery was down 181 points at 3.0407 cents a gallon.
