October 17, 2012 / 10:20 AM / 6 years ago

Brent oil slips, global economy worry persists

LONDON (Reuters) - Brent crude oil fell on Wednesday as worry about the global economy overshadowed relief that Spain avoided a ratings downgrade and optimism prompted by firm U.S. corporate results.

A man fills his truck up with gas at a gas station in Santa Monica, California, May 28, 2008. REUTERS/Lucy Nicholson

December Brent fell 36 cents to $113.64 a barrel by 1207 GMT. U.S. oil for November gained 21 cents to $92.30.

The November Brent contract, which expired on Tuesday, closed 73 cents lower at $115.07, while December settled 40 cents lower at $114.00

Brent gained in early trade after Moody’s Investors Service affirmed its investment grade rating on Spain, helping to ease investor worries that the crisis in the euro region is worsening.

However sentiment quickly reversed, with investors reluctant to buy into oil as concern about the demand outlook remained in focus, and crude stayed near the lower end of the day’s trading range.

“We still have fairly low demand and still fairly high production, especially from the OPEC side,” said Andy Sommer, oil market analyst with EGL in Dietikon, Switzerland.

“From that mixture, when you look at demand-supply balance in the world and look at latest inventory numbers for oil, you see that the picture is still a bit bleak,” he said.

Oil was supported by supply concerns, as the European Union slapped fresh sanctions on major Iranian state companies in the oil and gas industry and strengthened restrictions on the central bank.

The United States and the European Union are putting pressure on Iran to stop its nuclear programme, which they suspect has a military purpose, while Tehran says it needs the technology to generate electricity.

“The battle continues between the negativity from the slowing of the global economy compared to what global stimulus programmes might do to the economy going forward, while geopolitics has continued to remain an issue for market participants,” said Dominick Chirichella of New York’s Energy Management Institute.


Prices were also under pressure from American Petroleum Institute data showing U.S. crude inventories rose more than expected last week, while distillate stockpiles showed a surprise build. <API/S>

Crude inventories rose by 3.7 million barrels in the week to October 12, against a build of 1.7 million forecast in a Reuters poll.

Market participants were awaiting an inventories report at 1430 GMT from the U.S. Energy Information Administration.<EIA/S>

Market expectations for another “build in U.S. crude stockpiles highlight bearish market sentiment over excess U.S. oil supplies and these concerns could be magnified after... (the) American Petroleum Industry report showed an even higher build of 3.7 million barrels,” analysts at ANZ said.

“(The) EIA report will be a key price driver, but in the meantime there could be a downward bias.”

Adding to the improved supply picture, Saudi Arabia pumped around 9.77 million barrels per day (bpd) of crude oil in September, an industry source said.

The kingdom appears to be keeping its pledge to ensure global markets are well supplied with oil, as a Reuters analysis of U.S. import data shows sales to the world’s top consumer have dipped less than 10 percent from a four-year high hit this year.

Additional reporting by Manash Goswami in Singapore; Editing by Anthony Barker

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