Brent steady at $100 on stimulus hopes, supply threats

Thursday, 5 July 2012 00:22 - - {{hitsCtrl.values.hits}}

Reuters: Brent crude remained steady at $100 per barrel on Wednesday as weak global economic data fuelled expectations of a stimulus response by central banks, and as supply disruption worries on rising tensions over Iran’s nuclear programme supported prices, offsetting demand concerns.

Iran said it had successfully tested medium-range missiles capable of hitting Israel as a response to threats of attack, adding to mounting tensions between Tehran and the West, and increasing the risk premium on oil prices.

Brent crude had slipped 20 cents to $100.48 per barrel by 0245 GMT, after jumping more than 3 percent in the previous session on short-covering before the July 4 U.S. Independence Day holiday.

U.S. crude fell 18 cents to $87.48 after settling at its highest close since May 30 on Tuesday.

“Oil prices are being supported by expectations of monetary stimulus from central banks, coinciding with concerns of supply disruptions from Iran,” said Natalie Robertson, an analyst with ANZ Bank.

She added that there was a risk of Iran blocking tankers in the Strait of Hormuz.

Iran has previously threatened to block the Strait of Hormuz, through which more than a third of the world’s sea-borne oil trade passes, in response to increasingly harsh sanctions by the United States and its allies aimed at forcing it to curb its nuclear research programme.

The Islamic Republic announced the “Great Prophet 7” missile exercise on Sunday after a European embargo against Iranian crude oil purchases took full effect following another fruitless round of world power talks with Tehran.

Risk assets such as commodities and stocks have also been supported by hopes for more monetary stimulus to boost slowing economic growth.

The European Central Bank is expected to cut its main refinancing rate to a record low below 1 percent at its policy meeting on Thursday. Investors are also hoping for action from the U.S. Federal Reserve and China’s authorities.

However, Deutsche Bank and Societe Generale have lowered their 2013 Brent price outlooks on expectations of weak demand because of the gloomy economic climate.

“We believe that the euro zone crisis, the U.S. fiscal cliff, and the possibility of a hard landing in China will give the markets plenty to worry about and will keep risk appetite low and constrained,” Societe Generale said on Wednesday.

U.S. crude oil stocks fell more than expected last week, according to data released by industry group the American Petroleum Institute, helping to support prices.

Crude inventories tumbled by 3 million barrels in the week to June 29, well above the 1.9-million-barrel drawdown forecast by analysts, with Gulf Coast stocks off nearly 4.3 million barrels.