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Brent climbs above $114 on U.S. stimulus hopes, but gains limited

Published: September 10, 2012 | 6:19 am
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Brent crude futures climbed above $114 a barrel on Monday, but gains were limited as expectations for the U.S. Federal Reserve to launch further stimulus measures offset weak Chinese industrial output data.

Chinese factories ran at their slowest rate for 39 months in August, data showed on Sunday, while China’s refinery throughput and power generation rose less than 3 percent in August from a year earlier, marking a significant deceleration which began last year.

Brent crude futures for October delivery were trading 18 cents higher at $114.43 a barrel by 0350 GMT, after settling up 76 cents on Friday. U.S. crude was trading down 16 cents at $96.26 a barrel.

U.S. nonfarm payrolls increased by a weaker-than-expected 96,000 last month, data showed on Friday, boosting the chances that the fresh stimulus could be announced this week.

Supporting oil prices is a possibility that strategic petroleum reserves (SPR) may be released by the United States and other major oil consumer governments.

However, Obama administration officials told energy experts last week they worry a release of crude from U.S. emergency reserves would do little to temper global oil prices, partly driven by tighter supplies of refined fuel such as gasoline.

“Chinese data had been expected to be weak, so to some extent it has been taken into account in oil prices, but having said that it basically caps the upside,” said Masaki Suematsu, energy team sales manager at Newedge Japan.

A Reuters poll of economists after Friday’s weaker-than-expected jobs numbers showed a 60 percent chance of the Fed launching a fresh round of asset buying, or QE3, at the conclusion of its September 12-13 policy meeting.

But Suematsu said he did not believe that would happen this week, unless the poll showed a much higher chance of the event, such as 80 percent.

Operators have restored much of Gulf of Mexico oil and gas output following Hurricane Isaac, but nearly 14 percent of oil production and nearly 10 percent of natural gas output remained shut on Sunday, more than a week later, U.S. regulators said.

Also supporting oil prices is news that Saudi Arabia produced 9.7 million barrels a day (bpd) of crude oil in August, a drop of around 100,000 bpd from July. Kuwait produced around 3 million bpd of crude in August, up around 600,000 bpd from July, prompted mainly by greater demand from Asia.

The euro held near a four-month high on Monday on the back of speculation about the U.S. stimulus.

Geopolitical risk remained, as Germany’s foreign minister urged Iran on Sunday to make “substantial offers” to restart nuclear talks with world powers and told Israel allowing the Islamic Republic to get the bomb was not an option.

Asian shares crept up on Monday as the U.S. stimulus expectations and hopes for Europe to make further progress in its debt crisis management this week overshadowed soft Chinese data.


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