Brent slips below $109 on euro zone worries
But robust US data provides brighter outlook for demand from biggest oil consumer
Oil prices dipped below $109 today.
Brent crude slipped below $109 a barrel today on worries over the euro zone though prices were supported by robust US data which brightened the outlook for demand from the world's biggest oil consumer.
Orders for US-made durable goods surged last month and home prices posted their biggest year-on-year gain in six-and-a-half years in January, suggesting the US economy regained momentum early in the first quarter. That helped push Asian shares, base metals and the dollar higher.
Brent crude slipped 41 cents to $108.95 a barrel by 7.50 am, after settling $1.19 up and rising for a third straight day in the previous session. US oil fell 36 cents to $95.98 after ending $1.53 higher.
Reflecting investor sentiment on the economies of the two regions, Brent's premium to US crude remained near $12.52 a barrel hit in the previous session, the smallest in eight months.
"The fundamentals between the two benchmarks are different, but I think the WTI is a good economic indicator of the US and there are some expectations of recovery in oil demand in the US, even though there is an increase in domestic oil production," said Tetsu Emori, a commodities fund manager at Astmax Investments in Tokyo.
"We are also heading into the gasoline demand season so that should be supportive" for the US contract.
The spread has narrowed sharply from $23.45 in February. The improving US economy and increased pipeline flows from the Midwest have supported the US benchmark oil contract.
Meanwhile, Brent has been pressured by increased supplies from the North Sea, while the strict conditions on a rescue plan for Cyprus setting a precedence for other bailouts underlined concerns about Europe's financial stability.
"Although, markets are still grappling with the slowing European growth momentum, US domestic drivers of growth appear solid, with housing data overnight largely in line with expectations and durable goods orders slightly better than expectations," ANZ analysts said in a note.
The upbeat outlook for the United States was tarnished somewhat by other data yesterday showing a sharp drop in consumer confidence as Americans worried about the impact of tighter fiscal policy, particularly $85 billion in government budget cuts known as the "sequester".
Elsewhere, data from industry group the American Petroleum Institute late yesterday showed US crude oil stocks rose 3.7 million barrels last week, much higher than forecast in a Reuters survey of analysts. Inventories of petrol and diesel both fell more than expected.
The more closely-watched government data from the US Energy Information Administration (EIA) is set for release at 2.30pm today.