LONDON — Brent crude oil futures held above $116 a barrel on Wednesday, supported by positive economic data from the United States and Europe which helped boost confidence in demand outlook.
The vast US services sector extended a three-year run of growth, while data showing signs of recovery in Europe’s business activity also helped convince investors that the global economy was emerging from a slowdown.
However, US crude fell and Brent underperformed firmer equities, and analysts pointed to underlying demand-supply dynamics as likely to prevent much more strength.
"There is some optimism, but the fact that we are underperforming equities indicates we are over-stretched," said Filip Petersson, analyst at SEB in Stockholm.
"Production is well above demand, and we are heading into (refinery) maintenance which decreases demand for oil, and this will put an upward limit on prices."
Brent was down 25 cents to $116.27 per barrel by 10.05am GMT, retreating slightly from the previous session when it hit a more than four-month high.
US crude fell 53 cents to trade at $96.11.
US crude has dropped more than a% so far this week, versus a mostly steady Brent, as concerns about excess supply at Cushing, Oklahoma — the delivery point for the US contract — weigh on the benchmark.
Eurozone optimism
The crisis-ridden eurozone economy appeared to have turned a corner, this week’s Markit’s eurozone composite purchasing managers’ index showed, but this was offset by worries that political strife in Italy and Spain could see a return to anxiety on the debt outlook.
"Concerns over Europe appear to have eased, although problems in the region are still a long way from being resolved and fiscal austerity measures will continue to contribute to soft energy demand throughout 2013," National Australia Bank analysts wrote in a report.
Investors will now be looking out for the European Central Bank’s meeting on Thursday and China’s trade numbers due on Friday for more clues on the health of the global economy and what it may mean for commodities demand.
China’s January export growth was likely to be its strongest in 11 months, though a 17% year-on-year surge forecast in a Reuters poll may owe as much to trade cycles and Lunar New Year base effects as a recovery in demand.
US crude inventory data will also be on the radar.
Analysts estimated that US commercial crude oil stockpiles rose last week on higher imports and lower refining activity.
Data from the American Petroleum Institute showed that crude stockpiles rose by 3.6-million barrels last week, more than the 2.8-million barrel rise that analysts had forecast.
Weekly inventory report from the US Department of Energy’s Energy Information Administration is scheduled for release later in the day.
Oil markets are also monitoring developments in the Middle East where sanctions-hit Iran has taken delivery of several new tankers from Chinese shipyards, giving it more flexibility to maintain exports.
Iran and world powers announced new talks on Tehran’s nuclear programme on February 26, but hopes of progress were tempered when an Iranian official said the West’s goal in talking was to undermine the Islamic republic.
