Brent below $104 on demand worries, firm dollar

Brent futures slipped today, staying below $104 as bleak US economic data revived worries about demand growth in the world’s biggest oil consumer, while a stronger dollar also pressured prices.

Barring news on major supply disruption, the dollar will be a key driver for oil with investors increasingly expecting the greenback’s recent surge to peter out.

Brent slipped 5 cents to $103.73 a barrel by 0552 GMT. It is expected to end the week mostly unchanged. US oil was up 18 cents at $95.34, after settling up 86 cents, but was on track to end a three-week winning run.

“The dollar will influence oil quite a bit over the next few sessions because at some point it will start to weaken as it has strengthened too much in recent days,” said Tetsu Emori, a commodities sales manager at Astmax Investments in Tokyo.

“All US economic indications in the last few days have been weak and that is raising doubts about demand.”

The US economy showed fresh signs of slowing in the second quarter, with factory activity slipping in the mid-Atlantic region while groundbreaking declined at home construction sites.

The dollar held firm near a 10-month high against a basket of major currencies today after a regional Fed chief, long seen as a policy dove, said the Fed could begin easing up on stimulus this summer and end it late this year.

A firm dollar pressures oil as its strength makes commodities more expensive for holders of other currencies.

Brent has risen about $7 from the low of under $97 for the year touched on April 18th. The US contract has gained nearly $10 since the 2013 low of $85.61 was touched on the same day.

The difference between the US benchmark and Brent widened beyond $10 per barrel for the first time since May 7th in the previous session, and was at about $8 today. It hit a 2013 low of $7.20 earlier this week.

However, uncertainty over political tensions in the Middle East cushioned oil prices, with Russia’s foreign minister saying Iran must take part in a proposed international conference to try to end Syria’s civil war.

Charts show that Brent is expected to drop to $102.42 as it failed to break a resistance at $104.13, while US oil is expected to revisit yesterday’s low of $93.23, said Reuters technical analyst Wang Tao.