Brent crude oil slipped towards $107 a barrel today, weighed down by concerns over demand growth, although a weak dollar and fears about supply disruptions kept losses in check.
Investors have been rattled by the slowdown in China, where manufacturing output has stalled in recent months, and are awaiting more economic data to help gauge the demand outlook.
Brent crude slipped 12 cents to $107.05 a barrel by 07.40am GMT, after ending 48 cents lower on Friday and sliding for a second straight week. US oil fell 50 cents to $104.20 a barrel after settling 79 cents down in the previous session.
"Investors are taking money off the table after a strong run-up a couple of weeks ago," said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.
“There is potential for a further correction lower, particularly after a rise in speculative long positions.”
Hedge funds took huge positive bets on US crude last week just before the market turned south. Positive wagers by money managers on US crude reached a record high for the week ended July 23rd, data from the Commodity Futures Trading Commission showed.
A weaker dollar helped support oil.
The US currency slumped to a one-month low against the yen, reflecting expectations that the Federal Reserve will offer forward guidance on Wednesday that it intends to keep interest rates low for some time.
Oil was also bolstered by supply worries.
The North Sea’s Forties pipeline has cut pumping rates by about 40,000 barrels per day (bpd) because of maintenance, trade sources said, tightening supply of the crude that underpins the Brent benchmark.
Explosions rocked the eastern Libyan city of Benghazi yesterday, while protests in Egypt fuelled worries the conflict may spill over into other countries in the Middle East.
But global oil production remains robust. US crude output hit its highest since 1990 in the week ended July 19th, data from the Energy Information Administration showed.
Investors are eyeing official data this week from China on its manufacturing sector after an initial reading from HSBC showed activity at its slowest in 11 months in July.
They are also awaiting a two-day policy meeting by the Federal Reserve starting on Tuesday. If the Fed confirms it will reduce its bond purchases by September, that could fuel another commodities selloff. A delay could spur a rally.
Reuters
