Brent steady near $103 as US retail sales support, stockpiles drag

By Manash Goswami

SINGAPORE (Reuters) - Brent futures held steady near $103 a barrel on Tuesday, caught between hopes of a revival in demand growth after an unexpected jump in U.S. retail sales and concerns about rising stockpiles in the world's largest oil consumer.

The retail sales figures added to recent data pointing to underlying strength in the world's biggest economy, boosting risk assets such as Asian shares, but investors remain nervous about oil demand from the United States and China amid slowing consumption in Europe.

Brent crude gained 7 cents to $102.89 a barrel by 0536 GMT, after settling down $1.09. U.S. oil gained 19 cents to $95.36, after ending 87 cents lower. Both contracts fell the most in nearly two weeks in the previous session.

"We are not 100 percent sure that the United States is on a path towards steady recovery because data is conflicting," said Yusuke Seta, a commodity sales manager at Newedge Japan. "On top of that, China is not looking good and Europe is not looking good. All this is keeping prices in check."

Seta expects Brent to swing between $102 and $105 a barrel over the next few days because of the pull and push, with U.S. oil hovering between $93 and $97 a barrel.

Oil has also slipped in the last few sessions because of strength in the dollar after the positive U.S. numbers and Monday's retail data. A firm dollar pressures oil by making commodities more expensive for holders of other currencies.

"This proved a double-whammy for oil prices, as the better-than-expected retail sales numbers also provided a boost for the dollar," said analysts at ANZ in a report.

That hope of a U.S. recovery is causing the U.S. benchmark to rise faster than Brent, narrowing the difference between the two. Goldman Sachs expects the Brent-WTI crude spread to drop to $5 a barrel in third quarter 2013 with the supply balance at the West Texas Intermediate delivery point of Cushing, Oklahoma already in deficit.

North Sea Brent held a near $20 premium for much of 2012 over WTI, but the spread has fallen to less than $8 with the completion of pipeline projects such as the Permian Express, Longhorn and West Texas Gulf (WTG) Expansion.

U.S. commercial crude oil stockpiles were seen slightly higher last week after hitting record high inventories over the prior two weeks while gasoline inventories were seen lower, a preliminary Reuters poll of eight analysts showed.

The survey, ahead of weekly inventory reports from the American Petroleum Institute (API) and the U.S. Department of Energy's Energy Information Administration (EIA), forecast crude stocks to rise 200,000 barrels on average.

In the previous week, U.S. crude oil inventories jumped to a record as domestic output continued to climb, EIA data showed.

Brent is expected to rise to $103.77 before dropping towards $101.35, while U.S. oil may revisit its May 10 high of $96.24, Reuters technical analyst Wang Tao says.

Source: http://news.yahoo.com/brent-steady-near-103-us-retail-sales-support-070541491.html

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