LONDON — Oil edged below $106 a barrel on Tuesday, weighed down by concern that weak data from the US and China, the world’s largest consumers of oil, could slow global growth though a spate of supply problems offered some support.
A production glitch at the North Sea Buzzard oilfield and a brief dip in Libyan supplies due to bad weather helped underpin Brent crude oil, which has been hit in recent sessions by a rout in emerging markets and stocks.
Brent, the international benchmark, fell 11c to $105.93 a barrel by 9.01am GMT after two sessions of losses.
US crude futures, known as West Texas Intermediate (WTI), rose 42c to $96.85 a barrel following its largest daily percentage loss in nearly a month as it tumbled with US equities.
"The pressure is still on the downside for Brent. There is still concern about growth in emerging markets. The numbers coming out of the US yesterday caused concern," CMC Markets analyst Michael Hewson said.
Signs of slowing economic growth in the US and China raised concern about fuel demand while forecasts of excess supply this year weighed on oil prices.
The US economy has lost steam as manufacturing activity slowed sharply in January after the biggest drop in new orders in 33 years, while construction spending barely rose in December and factory activity reports have raised concern about growth in China.
"The macroeconomic picture looks bad and that’s why equities are weak. The so-called risk-off trade is in vogue now," Mitsubishi Corp risk manager Tony Nunan said in Tokyo, adding that the US Federal Reserve’s decision to further reduce its bond purchases has compounded problems in emerging economies.
Narrowing spread
Oil gained some support from tighter supply in the North Sea as the Buzzard oilfield, the largest field that contributes to Forties, has suffered a new production glitch.
Bad weather also reduced output from Libya on Monday but the National Oil Corporation said loading had restarted and production would return to normal on Tuesday.
"We’re waiting for US jobs data this week but investors are increasingly nervous and that would tend to have a downward effect on Brent, especially as it is trading at such a premium to WTI," Mr Hewson said.
The spread between Brent and WTI, hotly traded last year, was at $9.09 on Tuesday.
It fell to $8.06 on Monday, its narrowest level since October 18, after news that oil stocks at the US storage hub in Cushing, Oklahoma, were expected to have dropped by more than 1-million barrels for the first time in five months.
WTI has largely been landlocked for the past three years and has traded at a steep discount to Brent — as wide as $19 as recently as November.
But the spread has incrementally narrowed from $15 at the start of this year as traders anticipated a new pipeline coming online would relieve the glut of oil pooled at Cushing. The 700,000 barrels a day line was expected to drain oil from Cushing to US Gulf Coast refineries.
