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UPDATE 2-Brent steady above $107; China, US data spur demand hopes

Published: December 10, 2012 | 8:50 am
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* China Nov oil demand growth fastest in 2 years as economy picks up
* China’s Nov refinery runs surge 9.1 pct on year to a record
* U.S. employment ducks Superstorm’s impact, slips to near 4-yr low
* Asian shares, base metals firm as China, U.S. data brighten outlook (Adds China’s implied oil demand, graphic, updates prices)

SINGAPORE – Brent crude futures held above $107 a barrel on Monday, snapping five straight days of losses, as promising data from the world’s top two oil consumers revived demand growth hopes in a well-supplied market.

China’s implied oil demand in November surpassed 10 million barrels per day (bpd) for the first time. The country’s crude imports rose to the second highest daily rate on record, providing further evidence of a recovery after data over the weekend showed refinery runs rose to a new high.

Brent gained 45 cents to $107.47 a barrel by 0726 GMT, ending its longest losing streak since early November. Brent shed almost 4 percent in the previous week.

U.S. oil gained 35 cents to $86.28, reversing four straight days of declines.

“It does appear, based on the evidence of the data, that the Chinese economy has bottomed out,” said Ben Le Brun, a market analyst at OptionsXpress in Sydney.

“Being the world’s second-largest oil consumer, indications of a sustained recovery in China’s economy will be supportive for oil prices.”

China’s apparent oil demand grew at its fastest pace in two years and was 610,000 bpd above the previous record. The world’s largest crude buyer after the United States imported about 5.69 million bpd of crude last month, just below an all time high of 5.98 million bpd in February this year.

Data over the weekend showed the country’s refinery runs rose 9.1 percent to 10.125 million bpd from a year earlier as companies started new refining units.

“Investors are slightly more optimistic about China’s economic recovery than before and that is supportive for oil,” said Ken Hasegawa, a commodity sales manager at Newedge Japan.

China’s factory output and retail sales jumped in November as consumer inflation bounced off 33-month lows, indicating the country is enjoying an enviable mix of benign inflation and rebounding economic growth.

“The industrial production and retail sales data China released over the weekend build on the picture painted by recent data which suggests that China’s economy has turned the corner and is growing at over 7.5 percent annually,” said Ric Spooner, chief market analyst at CMC Markets, in a report.

The data followed numbers out of the United States that showed the unemployment rate fell to a near four-year low of 7.7 percent, defying predictions that Superstorm Sandy would deal a big blow to the labour market.

Asian shares, base metals and other risk assets also took heart from strong U.S. jobs data as well as a pick up in China’s factory output and retail sales growth to eight-month highs.


Investors are now awaiting outcome of a meeting of the U.S. Federal Reserve, which is expected to signal this week it will continue to pump money into the economy in 2013.

The market will also watch for comments on the supply outlook in the upcoming meeting of the Organization of the Petroleum Exporting Countries on Dec. 12.

The group is expected to stick with an output target of 30 million bpd agreed a year ago despite high stockpiles and slowing demand growth because turmoil in the Middle East has kept prices above $100 for most of this year.

“Ample supplies of crude and an overall uncertainty about the global economy is putting pressure on prices,” Hasegawa said. “The OPEC is not likely to change output quotas this time to keep any price increases in check.

Hasegawa expects both the contracts to trade in a tight range, with the European marker between $105-$111 a barrel for the rest of the month and the U.S. benchmark at $84-$89. (Editing by Himani Sarkar)


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