Brent rises towards US$108 as China eyes growth stimulus
SINGAPORE, May 21 — Brent crude rose towards US$108 (RM338) today, recovering from a 2012 low, on hopes that China could take new steps to stimulate growth and lift fuel demand at the world’s second-largest oil user, although concerns about the euro zone crisis capped gains.
China’s premier yesterday called for additional efforts to support growth, while Goldman Sachs said world oil demand was growing despite recent weak economic data. The comments provided a bright spark in global markets, battered in past weeks by fears that Greece’s political turmoil could spread to other countries in Europe.
Brent crude rose for the first time in four sessions, adding 74 cents to US$107.88 a barrel by 0516 GMT. Front-month prices fell on Friday to a 2012 low, following the largest three-week fall since May 2011.
US crude gained 35 cents to US$91.83, its first rise in seven sessions.
“We believe that the extent of recent sell-off was largely unwarranted,” Goldman Sachs analysts said in a May 18 note, pointing to better oil demand and tighter crude supply.
Implied world oil demand in the past three months was “up more than 1.0 million barrels per day (bpd) over last year” despite concerns about softening economic data, the bank said.
“With Iranian crude oil increasingly shut out of the world oil market, the supply-demand balance in the OECD countries swung back into deficit once again in April, suggesting a return to higher prices will be needed to balance the oil market in second half of 2012,” Goldman said.
Eyes on China stimulus
Talk that China could implement a stimulus plan in the near future prompted investors to cover short positions during Asia trade today, said Ken Hasegawa, a commodity sales manager at Newedge Japan.
“I don’t think we’ll see a sharp rebound. What we can see now is some correction after oil lost $20 from the previous high.”
Uncertainty over the euro zone debt crisis would cap gains in oil prices, Hasegawa said.
Europe remained mired in crisis despite a call by world leaders for Greece to stay in the monetary union and for Europe to balance austerity with growth during the weekend G8 meeting.
They offered no specific prescription for debt-crippled Greece, which holds fresh elections next month.
G8 leaders on Saturday also raised the pressure on Iran, signalling their readiness to tap into emergency oil stockpiles quickly this summer if tougher new sanctions on Tehran threatened to strain supplies.
The statement came days ahead of nuclear talks between world powers and Iran in Baghdad. — Reuters