Crude climbs on dollar weakness, supply worries and China data

17 January 2012 09:57  [Source: ICIS news]

By James Dennis

SINGAPORE (ICIS)--Brent crude futures rose more than $1/bbl on Tuesday supported by a weaker US dollar, better than expected economic data from China, and ongoing supply concerns generated by tensions between Iran and the West.

At 09:31 GMT, March Brent crude on London’s ICE futures exchange was trading at $112.35/bbl, up $1.01/bbl from the previous close. Earlier, the North Sea benchmark rose to a session high of $112.58/bbl, up by $1.24/bbl.

February NYMEX light sweet crude futures (WTI) were trading at $100.64/bbl, up $1.94/bbl on the previous close. Earlier the US benchmark rose to a session high of $100.71/bbl, up by $2.01/bbl from the previous close.

There was no settlement for WTI crude futures on Monday due to a public holiday in the US. Therefore the WTI price change is against the close on Friday 13 January.

The US dollar weakened against the euro and other leading currencies making dollar denominated commodities such as oil more attractive to international investors.

The US dollar weakened against the euro despite news that Standard & Poor’s had downgraded the eurozone rescue fund.

The European Financial Stability Facility (EFSF) was downgraded to AA+ from AAA amid concerns over its ability to borrow funds needed for the eurozone bailout at competitive rates.

The move comes after S&P downgraded credit rating for a number of eurozone nations including France over the weekend.

Official government data revealed that China’s economy grew by 8.9% in the fourth quarter of 2011 which is down from growth of 9.1% in the third quarter and the lowest level for two and a half years.

However, the figures were stronger than had been expected.

The lower growth levels follow the implementation of monetary tightening policies by the Chinese government which were introduced to control inflation and cool the property market.

Chinese growth has been impacted by weaker exports to markets in Europe and US that have been hard hit by the global economic slowdown.

Statistics showed that economic growth in China during the whole of 2011 was 9.2%, which is down from 10.2% in 2010.

Economists expect that the Chinese economy will slow further in the first quarter of 2012.

Saudi Arabia’s oil minister Ali al-Naimi said that the world’s largest oil exporter could increase output by 2m bbl/day at short notice.

The comments from Saudi Arabia come after Iran warned Gulf Arab nations not to increase output to cover any loss of Iranian exports which could result from sanctions imposed by the US and its allies.

Iran has threatened to halt oil shipments through the strategically important Straits of Hormuz if sanctions are imposed on its oil exports.

Oil shipments from Saudi Arabia, the United Arab Emirates, Kuwait, Iraq and Iran pass through the Straits of Hormuz.

Iran is the second largest producer in OPEC and the world’s fourth largest oil producer with an output of around 3.55m bbl/day.

The nation is also the third largest oil exporter, according to data from the International Energy Agency (IEA).

For more information on crude, visit ICIS chemical intelligence

By: James Dennis
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