By Manash Goswami
SINGAPORE (Reuters) – Brent futures held above $103 a barrel on Wednesday as demand growth hopes revived following data showing a surprise fall in crude stockpiles, with changes by South Korea on its freight charge rebates providing an additional boost.
Investors are also keeping an eye on the dollar, wary of any disappointment in a trio of U.S. job reports. Oil and most other commodity prices have swung heavily in the past few weeks with the U.S. currency as market participants try to gauge if the Federal Reserve will roll back its monetary stimulus.
Brent crude gained 11 cents to $103.35 a barrel by 0257 GMT, after settling up $1.18 in the previous session. U.S. oil rose 44 cents to $93.75.
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“Overall, oil markets will remain largely choppy as investors try and gauge if stimulus measures from the U.S. Fed will continue or not,” said Ben Le Brun, an analyst at OptionsXpress in Sydney. “Broadly, the dollar is trending upward as everyone is bracing for an eventual end in stimulus and that will weigh on commodities.”
Brun expects the uncertainty over demand growth and monetary stimulus, plus ample supplies, to keep Brent trading between $101 and $105 a barrel, while the U.S. contract will stay between $92 and $94.
The dollar index was flat at 82.800, up from a one-month low of 82.428 plumbed on Monday in the wake of disappointing manufacturing data that argued against an early start for the Fed to unwind its stimulus programme.
Friday’s nonfarm payrolls (NFP) data will be key in influencing the dollar. Investors will watch a report by payrolls processor ADP, due later on Wednesday, for clues on the NFP report. Even the weekly jobless claims series has gained more attention as investors try to second guess the U.S. central bank.
“These economic indicators have gained a lot importance of late, and most markets, including oil, are looking at these numbers more than they were before,” Brun said.
S KOREA
Oil also got a spark from South Korea boosting incentives for crude imports from regions other than the Middle East. Its move is expected to increase demand for crudes priced off Brent as South Korea tries to cut reliance on Middle East suppliers.
“We still need to compare the economics of importing Forties with Middle East crudes,” a South Korean oil trader said, referring to a North Sea crude grade.
“However, the possibility of North Sea arbitrage flow will grow in general in line with the government’s decision to support diversification of crude sources.”
Prices were also supported by data from the American Petroleum Institute (API) that showed a surprise 7.8-million-barrel drop in crude stocks, versus forecasts for a decline of 400,000 barrels.
Brent faces resistance at $103.54 per barrel, and a break above that level will lead to a further gain to $104.46, according to Reuters technical analyst Wang Tao. (Additional reporting by Florence Tan; Editing by Tom Hogue)
Source: Reuters
