BD:Oil slips, set for first monthly fall in four months
LONDON — Global oil prices slipped below $108 a barrel on Friday and were set for their first monthly drop in four with concern about faltering Chinese consumption outweighing expectations that a strengthening US economy would boost global demand.
Brent crude, the international benchmark, was poised to slip 2.6% in January after data showed China’s fuel consumption rose at its slowest pace in more than 20 years in 2013.
Drawing strength from a cold spell and an improving economy, the US futures contract, known as West Texas Intermediate (WTI), is set to end little changed, narrowing the difference between the two.
Brent crude had slipped 28c to $107.67 a barrel by 9.50am GMT, after closing 10c higher in the previous session. Trade was thin, with some Asian markets closed for the Lunar New Year holiday.
US oil shed 26c to $97.97. The spread held near the lowest settlement price since November 7.
"Global oil growth forecasts continue to get revised upwards, primarily driven by an improving US economy," OptionsXpress market analyst Ben le Brun said in Sydney.
"That’s a good thing and will underpin oil prices. The markets should get used to the new reality of slowing growth in China."
Despite strong support, gains in the dollar could put pressure on oil over the next few days, Mr le Brun said.
Brent faced support at around $105 and the US benchmark at $97 should they weaken from current levels, he said.
The US dollar traded at one-week highs against a basket of major currencies. A strong greenback weighs on commodities such as oil that are priced in the currency.
The dollar gained partly as US gross domestic product grew at a 3.2% annual rate in the final three months of last year. While that was a slowdown from the third quarter, it was a far stronger performance than had been anticipated earlier in the quarter.
The dollar is also strengthening as the US Federal Reserve stuck with its plan to keep cutting monetary stimulus.
"The strong (fourth quarter US gross domestic product) print drove gains and, with tapering now decided for another month, we expect a little more upside in WTI in the near-term," ANZ analysts said in a note.
"Confidence in the US economy continues to improve as does underlying energy demand."
