Oil nears US$106 on higher demand

SINGAPORE: Brent crude futures rose towards US$106, recouping some
losses as investors seized the opportunity to buy after the previous
session saw the biggest plunge in nearly three months, given worries
over Middle-East supply disruption.
Commodities plunged across
the board on Wednesday, on renewed fears that Europe's debt crisis would
drag on, while crude was weighed down by the absence of action from a
meeting of the Organisation of Petroleum Exporting Countries (Opec) to
trim output in case oil demand grows slower than expected.
Brent
crude gained 83 cents a barrel to US$105.85 by 0646 GMT yesterday, after
settling US$4.48 a barrel lower on Wednesday and posting the biggest
one-day percentage loss since Sept 22.
US crude was 21 cents
higher at US$95.16, after settling US$5.19 lower on Wednesday, also the
benchmark's biggest one-day percentage loss since Sept 22.
“We
are going to see West Texas Intermediate trade in the US$95 to US$102 a
barrel range weighed between the ongoing economic uncertainty and supply
concerns,” said Jonathan Barratt,
managing director at Commodity Broking Services in Sydney. “Optimism
comes after every speech in Europe, but there are clouds still.”
Asian
shares, base metals and gold fell, while the euro nursed losses after
plumbing its lowest in 11 months following a surge in Italy's borrowing
costs.
The market view that last week's European Union (EU)
summit had failed to produce a solution to the crisis was reinforced
when Italy had to pay a stinging 6.47% on five-year bonds on Wednesday, a
record borrowing cost for the euro area.
“There is still a lot
of uncertainty surrounding Europe and that is worrying investors,” said
Ken Hasegawa, commodity derivatives manager at Newedge Brokerage in
Tokyo.
“Although there was an agreement, a lot of countries are
involved and they need to get the deal cleared,” he said, referring to
the EU summit.
On Wednesday, Brent broke below its 300-day moving
average of US$107.08 and hit a session low of US$104.36, the lowest for
front-month contract since Oct 6. US crude also dropped below the
200-day moving average of US$95.98.
Markets also shrugged off
data from the Energy Information Administration showing a
1.9-million-barrel drop in US crude stockpiles last week.
“A lot
of technical levels, like the 200-day moving average, were crossed and
that triggered stop-loss selling leading to such a big fall overnight,”
Hasegawa said.
Gains may still be capped after data showed
China's factory output shrank again in December due to a fall in new
orders, entrenching expectations that manufacturers are struggling with
waning global demand and tight domestic credit conditions. - Reuters