SINGAPORE — Brent crude fell towards $107 a barrel on Tuesday as investors locked in profits after recent sharp gains to a three-month top, while easing worries about supply from the Middle East also dragged down prices.
Oil saw its biggest weekly rise in a year last Friday as concerns mounted that tension in Egypt could disrupt traffic through the Suez Canal, through which a large portion of the world’s oil is shipped. But prices have come off on indications that some stability could return to the Arab world’s biggest country.
"The prices have tracked so much higher in the past few weeks because of, firstly, the Syrian civil war escalation and then the Egyptian crisis," National Australia Bank economist Vyanne Lai said.
"So oil prices have built up to a point that, unless there is more major news about intensifying Middle East conflicts, you’re likely to see some form of correction."
Brent fell 19c to $107.24 by 5.28am GMT, after slipping to a session low of $106.90 earlier and off Monday’s three-month peak of $108.04. US crude fell 10c to $103.04, recovering from a low of $102.71.
News that Egypt’s interim head of state had set a speedy timetable for elections to drag the country out of crisis and announced returns of a Libyan oilfield and an Iraqi pipeline eased supply worries.
But traders said they were still keeping an eye on Egypt, where the military ousting of Islamist President Mohamed Mursi last week sparked a wave of bloody protests.
"The Egypt situation is going to continue to be a good support on the oil market with lower side being limited and (the possibility of) prices going higher should there be any disruptions," Newedge Japan commodity sales manager Ken Hasegawa said.
China data eyed
Investors are now waiting for data from China, the world’s second-biggest oil consumer, that could show growth in the world’s second-largest economy grinding towards a 23-year low, according to a Reuters poll.
China’s annual consumer inflation accelerated more than expected in June to 2.7% as food costs soared, data showed on Tuesday, limiting room for the People’s Bank of China to loosen policy to underpin the slowing economy.
"The 2.7% is still generally a benign number. In 2010 it went up to much more than that, so I wouldn’t think it’s something to herald about as fundamentally the Chinese economy is slowing and industrial data recently pointed to contracting manufacturing and industrial production," Ms Lai said.
But oil could draw some support from an expected 3.3-million barrel drop in US crude stocks in the seven days to July 5 due to lower imports and higher refinery activity, a Reuters poll showed.
