SINGAPORE, Feb 13: Brent crude steadied on Wednesday, holding just below a nine-month high near $119 per barrel on forecasts for faster-than-expected growth in global oil demand this year, with easing tensions in Iran helping to subdue prices.
The US Energy Information Administration (EIA) and the 12-member Organization of the Petroleum Exporting Countries increased their outlook for world oil consumption growth, citing increasing signs of a recovery in the global economy.
Investors are also taking cues from the currency markets, which are awaiting a meeting of G20 finance ministers and central bankers this week amid increasing international tensions over the euro’s strength and the yen’s weakness.
‘The faster demand forecasts are supporting oil prices, but the concerns of a currency war are weighing on the markets,’ said Ker Chung Yang, senior commodity analyst at Philips Futures in Singapore.
Front month Brent futures shed 10 cents to trade at $118.56 per barrel by 0539 GMT. It touched a high of $118.75 earlier in the session, around 40 cents away from a nine-month high of $119.17 hit last week.
US crude rose 12 cents to $97.63 per barrel.
Trading volumes were low as China, Taiwan and Hong Kong remained closed for a third day this week for the Lunar New Year holiday.
ECONOMY AND DEMAND BOOST
Consumption of oil will expand by 840,000 barrels per day (bpd) this year, the OPEC said in its monthly report, 80,000 bpd more than previously expected.
Due to higher demand, and little change in supply expectations from producers outside the group, OPEC expects demand for its crude to average 29.78 million bpd in 2013, up 130,000 bpd from the previous estimate.
The EIA followed suit and increased its forecast for demand growth by 110,000 bpd to 1.05 million bpd in 2013, taking global demand to 90.2 million bpd this year, adding to evidence of global demand surpassing expectations in early 2013.
US crude inventory may have risen last week as refineries head into maintenance in the world’s biggest oil consumer, but an expected cut in imports may negate the impact in coming weeks. Crude stocks may have risen 2.4 million barrels in the week to Feb 8, a Reuters poll showed.
Prices may get a fillip after euro zone industrial output data and US retail sales data are released later in the day.
Oil markets got some relief from the push towards higher prices as tensions over Iran’s nuclear programme eased between the Islamic republic and the United States.
GEO-POLITICS
The Middle Eastern nation acknowledged that it was converting some of its higher-grade enriched uranium into reactor fuel, which is one way for Iran to slow the growth in its stockpile of material that could be used to make a bomb.
Iran’s production of that higher-grade uranium has been a worry for major powers because it is only a short technical step away from the 90-percent purity needed for a weapon.
Closer to home for Asian investors was a nuclear test by North Korea, which may escalate regional tensions, especially after US and China came down strongly on the Asian nation.
North Korea said the test had ‘greater explosive force’ than those it conducted in 2006 and 2009.
Its KCNA news agency said it had used a ‘miniaturised’ and lighter nuclear device, indicating it had again used plutonium, which is suitable for use as a missile warhead.
‘While North Korea is a negligible oil consumer, the move nevertheless could be seen as contributing to geopolitical instability in the world’s preeminent demand growth region,’ JBC Energy said in a report. (agencies)
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