FX:Crude oil steady near 1-week low on global demand concerns
Forexpros - Crude oil futures wavered between small gains and losses on Thursday, as renewed concerns over China’s economic growth outlook raised fears over the Asian nation’s oil demand, while traders continued to eye developments surrounding Iran and potential disruption to supplies.
On the New York Mercantile Exchange, light sweet crude futures for delivery in April traded at USD105.34 a barrel during European morning trade, dipping 0.1%.
The April contract traded in a tight range of USD105.95, the daily high and USD105.27, the session low. Prices fell to USD105.11 on Wednesday, the lowest since March 7.
Concerns over China’s growth outlook resurfaced after Premier Wen Jiabao said on Wednesday that China must embrace slower growth and bolder political reform to keep its economy from faltering. He also dampened hopes for any near-term easing measures in the country's property sector.
A deeper slowdown in China, the world’s second biggest economy, would impair a global expansion that is already faltering because of Europe’s debt crisis.
China is the world's second largest oil consumer after the U.S. and has been the engine of strengthening demand.
U.S. government data published on Wednesday showed crude stocks at the Cushing, Oklahoma, delivery hub rose 2.5 million barrels to a nine-month high last week, underlining fears over a slowdown in U.S. energy demand.
The International Energy Agency raised concerns over the short-term global energy demand outlook on Wednesday.
In its monthly report, the IEA said that global oil demand is expected to grow 0.9% in 2012, as a subdued economic backdrop and high oil prices "both restrain any upside momentum for consumption."
Meanwhile, ongoing strength in the U.S. dollar also weighed on prices. The greenback has strengthened since the Fed upgraded its outlook on the U.S. economy on Tuesday, causing investors to trims back expectations for a third round of quantitative easing by the central bank.
Oil prices typically weaken when the U.S. currency strengthens as the dollar-priced commodity becomes more expensive for holders of other currencies.
But futures continued to draw support from growing tensions between Iran and Western powers. In a joint news conference with British Prime Minister David Cameron, U.S. President Barack Obama said the window for a diplomatic solution with Iran over Tehran's nuclear program was shrinking.
The two leaders also discussed the possibility of releasing emergency oil reserves.
Iran and Western nations have been locked in a stand-off in recent months over Tehran's nuclear program.
Growing tensions between Iran and Israel also remain in focus. There are fears that an escalation of hostilities between Israel and Iran could set off a conflict across the region and send oil prices skyrocketing.
Iran produces about 3.5 million barrels of oil a day, making it the second largest oil producer in the OPEC, after Saudi Arabia.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for April delivery were fractionally lower, down 0.06% to trade at 124.52 a barrel, with the spread between the Brent and crude contracts standing at USD19.18.
