Brent slips, stays below US$ 104 on demand worries, firm dollar

SINGAPORE (Reuters): Brent futures slipped on Friday, staying below US$ 104 as bleak U.S. 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 US$ 103.73 a barrel by 0552 GMT. It is expected to end the week mostly unchanged. U.S. oil was up 18 cents at US$ 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 U.S. economic indications in the last few days have been weak and that is raising doubts about demand.”

The U.S. 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 strong dollar and a weak outlook for demand will keep brent trading in a US$ 103 to US$ 105 range next week, while the U.S. contract will swing between US$ 95 and US$ 98, Emori said.

The dollar held firm near a 10-month high against a basket of major currencies on Friday 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 US$ 7 from the low of under US$ 97 for the year touched on 18 April. The U.S. contract has gained nearly US$ 10 since the 2013 low of US$ 85.61 was touched on the same day.

The difference between the U.S. benchmark and brent widened beyond US$ 10 per barrel for the first time since 7 May in the previous session, and was at about US$ 8 on Friday. It hit a 2013 low of US$ 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 US$ 102.42 as it failed to break a resistance at US$ 104.13, while U.S. oil is expected to revisit its Thursday low of US$ 93.23, said Reuters technical analyst Wang Tao.