Brent slips below $123

SINGAPORE (Reuters): Brent crude futures slipped $1 on Monday after Iran agreed to resume talks on its nuclear programme, easing fears of a supply disruption in the Middle East.

Prices were also under pressure on demand growth concerns after data showed U.S. employers hired far fewer workers in March than in previous months. Job growth in the world’s biggest oil consumer slowed to 120,000, the Labor Department said on Friday, the smallest increase since October.

Front-month Brent crude fell 98 cents a barrel to $122.45 by 0718 GMT, after slipping as low as $122.17. U.S. oil traded $1.28 a barrel lower at $102.03, after sliding as low as $101.87. Oil futures markets were closed on Friday. “The impending talks on Iran’s nuclear programme are a step in the right direction, but this issue will continue to set a high floor on oil prices,” said Victor Shum, senior partner at oil consultancy Purvin & Gertz. “Apart from Iran, we had the U.S. jobs data, which is also bearish for oil.”



Brent may trade between $120 and $125 and U.S. oil in a $100-$105 range this week, Ken Hasegawa, a commodity derivatives manager at Newedge Brokerage in Tokyo, said. Oil may slip below the range only if investor worries about a supply disruption in the Middle East are significantly reduced, he said.

Iranian media and Western officials said talks over Tehran’s nuclear programme, which collapsed more than a year ago, would begin on Saturday in Istanbul.

Getting Iran to suspend high-level uranium enrichment and close a nuclear facility built deep under a mountain near the holy city of Qom were “near-term priorities” for the United States and its allies, a senior U.S. official said.

Worries that the standoff between Tehran and the West would escalate and disrupt oil exports from the Middle East have boosted Brent prices nearly $20 so far this year to a high of $128.40 touched last month.

“The talks are good news. They are going to ease some stress from the oil market, but not enough to bring oil below its current trading range,” said Hasegawa.

The European benchmark’s wave pattern indicates it is biased to drop below a neutral range of $121.80-$123.54, while a fall below $101.37 will confirm a bearish target of $99.37 for U.S. oil, according to Reuters technical analyst Wang Tao.

China’s annual consumer inflation rose a faster-than-expected 3.6 percent in March, with volatile food prices leading the increase.

Yet the acceleration may not hurt the country’s oil demand growth as economists saw the spike as temporary, reinforcing the view that Beijing has room to loosen credit further and support economic growth.

Concerns about demand growth from the United States and Europe as investors worry about the health of these economies are keeping a lid on oil prices.

Last Friday’s U.S. employment numbers were the latest to make markets nervous. Job growth was less than half the average monthly increase in the prior three months and way below the lowest estimate in a Reuters survey. Economists had expected an increase of 203,000 and the jobless rate to hold at 8.3 percent.

“Oil is falling because the jobs data came out worse than expected,” Hasegawa said.