Singapore - Brent futures were steady above $107 a barrel on Friday, supported by fresh signs of a strengthening U.S. economy and the prospect of supply disruptions from the Middle East.
U.S. government data showed new claims for unemployment benefits dropped to their lowest in 3-1/2 years, while consumer sentiment at the world’s biggest oil consumer improved in December to its highest level in six months.
Brent crude slipped 5 cents to $107.84 a barrel by 0550 GMT after settling Thursday 18 cents higher at $107.89 a barrel. For the week, Brent is poised to rise 4.6 percent, reversing losses in the previous week.
U.S. crude rose 28 cents to $99.81 a barrel. The benchmark is set for a 6.8 percent weekly gain, after falling the week before.
“The highlight is the continuation of good data on the U.S. economy. China also seems to have managed to orchestrate a soft landing, which is supportive of oil prices,” said Ben Le Brun, market analyst with OptionsXpress in Sydney. “The problem child is still Europe.”
Trading volumes are expected to be low as investors stayed away from riskier assets ahead of the Christmas break, he added.
China cut its banks’ reserve ratio requirement earlier this month in the first reduction in almost three years. The move marks a shift in policy towards promoting growth as a global economic slowdown erodes demand for the nation’s exports.
Asian shares followed Wall Street higher on the U.S. data, while the euro remained subdued on concerns over the debt crisis in Europe.
Supply risksRising tensions in Iran and Iraq renewed fears of crude supplies being disrupted from the two OPEC producers.
A rash of bombings hit Baghdad in the first big attack on Iraq’s capital since a crisis between its Shi’ite Muslim-led government and Sunni rivals erupted after the withdrawal of U.S. troops.
State television quoted a navy commander as saying Iran’s navy will conduct a 10-day wargame in an area from east of the Strait of Hormuz to the Gulf of Aden starting on Saturday, adding to oil supply worries.
Another OPEC member, Nigeria, has suffered an actual supply disruption. Royal Dutch Shell said its 200,000-barrels-per-day deepwater Bonga facility, which accounts for around 10 percent of Nigeria’s output, is shut with no planned restart date after an oil leak on Tuesday.
Supply disruptions pose a bigger risk to the market now as oil stockpiles in developed countries have fallen significantly over the past year, JP Morgan analysts said in a research note.
Since the end of 2010, OECD crude and product inventories have fallen by 92 million barrels, or 2.3 percent, as of October, compared to the typical seasonal increase of 57 million barrels, they said.
“With the Libyan outage, crude spiked about $20 a barrel, but the impact was cushioned by ample inventories. Moving into 2012 however, the global economy does not have this luxury,” the report said.
The bank expects Brent crude prices to trade between $100-120 a barrel if disruptions are kept to a minimum.
EurozoneThe prospect of Europe slipping into a recession continued to weigh on the market, amid doubts over how effective this week’s European Central Bank tender of cheap loans will be in easing the financial strain on troubled euro zone economies.
Helping to lift sentiment was news that Italy’s Senate passed a vote of confidence in the government of Prime Minister Mario Monti that put the final seal on an emergency austerity budget rushed through to restore market confidence in the euro zone’s third-biggest economy.