Brent slips near $108 as China, higher oil supply weigh

By Florence Tan SINGAPORE (Reuters) - Brent crude eased down towards $108 a barrel on Thursday, not far above its lowest in more than two weeks, as lacklustre China data, a potential rise in Libya's oil supply and record-high inventories in the United States weighed on prices. China's official Purchasing Managers' Index (PMI) in April edged up from March, but it missed forecasts. Analysts expect the nation's economic slowdown to continue due to a cooling property sector and the impact of structural reforms. [ID:nB9N0N005Y] [ID:nL3N0NK3GC] "It's slightly negative as it confirms a reasonably difficult outlook for the Chinese manufacturing sector," said Ric Spooner, chief analyst at CMC Markets in Sydney. June Brent crude fell 2 cents to $108.05 a barrel by 0642 GMT, following a 0.8 percent drop in the previous session to settle at its lowest close since April 11. The contract dropped as low as $107.55 a barrel during Wednesday's session. U.S. crude for June delivery edged down 3 cents to $99.71 a barrel, after falling 1.5 percent on Wednesday to settle at its lowest finish since April 2. Investors shrugged off the U.S. Federal Reserve's announcement on Wednesday that it would cut its bond purchases by another $10 billion, opting to focus on the recovery underway in the world's largest economy and oil consumer. The investors will be scouring jobs data due later on Thursday and Friday for affirmation. [ID:nL2N0NM1ZT] Meanwhile, a rise in U.S. oil supply to its highest ever depressed West Texas Intermediate (WTI) prices and widened its spread to Brent to more than $8. The spread could widen to $10 as WTI comes under pressure from rising inventories and a risk premium underpins Brent, Spooner said. U.S. crude inventories rose by 1.7 million barrels in the week to April 25 to just under 400 million barrels, data from the Energy Information Administration showed on Wednesday. This is the largest volume since 1982, when the EIA began collecting data, exceeding the record set in the previous week. [ID:nL2N0NM1BO] "The system is struggling to fully accommodate increases in domestic crude supply despite high refinery utilisation," BNP Paribas analysts said in a note on U.S. oil inventories. Brent was weighed down by the imminent restart of the eastern Zueitina port, although this was partially offset by a drop in Forties output, the main grade in the benchmark's crude mix. Britain's Buzzard oilfield in the North Sea, which pumps Forties, was shut for planned maintenance and construction work. [ID:nL6N0NG2IN] In Libya, eastern Zueitina port will load on May 1-3 its first tanker of crude since reopening after being closed for nearly 10 months due to protests. [ID:nL6N0NM3AL] "The market continues watching for the potential disruptions from supplies particularly from Ukraine and Libya," CMC's Spooner said. Geopolitical risks persist in Libya despite the restart of two ports, he added. "It's a very unstable situation and it's very difficult to count on that supply," Spooner said. Outages in Africa and sabotage in Iraq are keeping OPEC's supply far below the group's target even as output has risen in April from March's three-month low, a Reuters survey found on Wednesday. [ID:nL6N0NM4IJ]

Advertisement