Brent crude fell below $113 a barrel today as a sharp slowdown in China's trade flows heightened fuel demand worries, though these were partly offset by hopes that the world's second biggest economy would ease monetary policy and so boost oil use.
China's July exports rose just 1 per cent from a year earlier, undershooting forecasts by a large margin and adding to a downbeat set of monthly data that has boosted expectations of fresh government action to shore up the economy.
"The trade balance data missed the mark, raising the question of commodities demand in the second half, and provided some downside to commodities prices," said Tim Waterer, a senior trader at CMC Markets in Sydney.
"But it's not entirely bad news how the market is interpreting this news. The weakness in China's economic data leaves the door open for further rate cuts by the central bank that could kick start the economy again."
Brent crude for September delivery fell 34 cents to $112.88 by 5.27am while US crude was at $93.20, down 16 cents.
Oil is still set to rise for a second straight week as improved jobs data from the United States lifted the fuel demand outlook in the world's largest oil consumer and optimism grew for more monetary easing policies from the euro zone and China to support global growth.
Worries about how high oil prices could hurt swelling global growth could limit gains, Jonathan Barratt, chief executive of BarrattBulletin, a Sydney-based commodity research firm, said.
"People are questioning the result of this rally," he said.
China's crude imports in July rose 12 per cent from a year earlier but were the lowest since last November.
Opec said yesterday it may have to reduce its forecast for growth in world oil demand in 2013 by 20 per cent on a vague and turbulent outlook for the global economy.
Tighter North Sea supply due to field maintenance and tension in the Middle East also kept Brent higher, widening its spread to West Texas Intermediate to nearly $20 a barrel, the widest since mid-May.
Reuters market analyst Wang Tao said the spread was expected to widen to $24.34 a barrel in the next four weeks if it broke through a support at $20.49.
North Sea oil output is set to plunge 17 per cent in September due to oilfield maintenance and natural decline, adding to signs of a shortage that may artificially lift prices of Brent, a global oil-pricing benchmark.
Tropical Storm Ernesto crossed the coast of the Gulf of Mexico yesterday, sending wind gusts and showers across the state of Veracruz, home to some of Mexico's busiest ports and oil installations.
Reuters
