Brent falls on weak demand, eyes Fed stimulus hopes

Thu Jun 7, 2012 5:16am EDT
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By Manash Goswami and Ikuko Kurahone

SINGAPORE/LONDON (Reuters) - Brent crude dipped on Thursday due to slack demand while prices were supported around $100 by signs Europe would find a way to deal with Spain's banking crisis and the United States might embark on monetary stimulus.

Brent crude was down 71 cents to $99.93 a barrel by 0856 GMT, having hit a low of $99.62 as it gave up part of its $1.80 rise a day earlier. U.S. crude was trading 30 cents down at $84.71.

Volume was modest for both contracts ahead of U.S. Fed Chairman Ben Bernanke testifying before Congress later on Thursday.

Oil lagged other risky assets such as both Asian and European equity markets rose.

Crude inventories in the United States, the world's second largest energy consumer, fell last week after 10 straight weeks of stock build, but the drop was smaller than analysts' expectations. Fuel demand over the past four weeks declined by 2 percent from a year earlier.

"The price of oil has rebounded well from its June 1 lows. However, the price increase is just a flow-through effect of the risk-on mentality from investors," Miguel Audencial, sales trader at CMC Markets, said in a report.

"Stockpiles are still at high levels and I can't see it trading above $90 in the near term unless there is an indication that demand will significantly increase," he said, referring to U.S. crude prices.

Brent fell below $100 for the first time since October on Friday, and prices are down more than 20 percent from the 2012 high of $128.40 posted in March.   Continued...

A worker collects crude oil sample at an oil well operated by Venezuela's state oil company PDVSA in Morichal July 28, 2011. REUTERS/Carlos Garcia Rawlins