LONDON — Oil edged further above $111 a barrel on Tuesday as the prospect of stronger demand in Asia outweighed concern over the pace of economic recovery in top consumer the US.
Demand for crude from Saudi Arabia is likely to rise over the coming months, Saudi Oil Minister Ali al-Naimi said on Monday — a sign the Organisation of Petroleum Exporting Countries (Opec) heavyweight sees a recovery in its biggest export market, Asia.
China, the world’s second-largest oil consumer, imported just over 1-million barrels a day from Saudi Arabia in 2012, a rise of more than 7% from 2011.
Brent gained 44c to $111.52 a barrel by 10.53am GMT. US crude rose 4c to $97.11 a barrel.
"The fact that oil prices have been able to gain despite negative framework conditions of late — weaker data from China and the US just now, and a firmer dollar, weaker equity markets and rising US inventories last week — can be interpreted as a sign of an incipient trend reversal," Commerzbank said in a research note.
But some investors anticipate downward pressure on oil prices as cooling US factory activity in March suggests the world’s largest economy lost some momentum at the end of the first quarter.
"You see the US economy settling into a long hard grind of moderate growth of around 1 to 1.5%. Growth in previous recoveries was closer to 3.5%," CMC Markets chief market analyst Ric Spooner said in Sydney.
"With this kind of growth, the US is going to struggle to bring down unemployment, which is a real drag on the economy."
Pegasus
US crude could also be pushed lower by a pipeline leak in Arkansas that threatens to increase the supply of oil coming from Canada to the US Midwest.
Exxon Mobil continued efforts to clean up thousands of barrels of heavy Canadian crude oil spilled from a near 65-year-old pipeline in the US state.
Exxon’s Pegasus pipeline, which can carry more than 90,000 barrels a day (bpd) of crude to Texas from Illinois, is used to supply US Gulf Coast refineries.
"Any kind of bottleneck will cause weakness in the midcontinent, so you could see some temporary weakness in WTI," said Mitsubishi Corp risk manager at Mitsubishi Tony Nunan said in Tokyo, referring to West Texas Intermediate-grade crude oil.
"But this is also the time when US refineries are starting to ramp up in preparation for the gasoline season."
A Reuters poll showed US commercial crude inventories are expected to have risen by 2.3-million barrels for the week ended March 29, while refinery use was expected to have expanded 0.5 percentage points from the prior week’s level of 85.7% of capacity.
