Brent slips below $102 on weak U.S. data

Brent slips below $102 on weak U.S. data; Fed hopes cap fall CLc1 LCOc1 – RTRS

IFM Web desk – Brent crude futures slipped below $102 a barrel on Tuesday as weak U.S. manufacturing data stoked worries about demand growth in the world’s biggest oil consumer.

But the data also curbed speculation that the U.S. Federal Reserve’s monthly $85-billion bond-buying stimulus will taper soon, limiting oil’s losses.

U.S. factory activity shrank in May to its lowest level in nearly four years in the latest sign of a soft patch for the economy.

Brent crude for July delivery LCOc1 slipped 13 cents to $101.93 a barrel by 0639 GMT, after settling $1.67 higher in the previous session. The contract hit its lowest price in a month on Monday, but rebounded sharply due to a weak dollar and a North Sea outage.

U.S. oil CLc1 fell 42 cents to $93.03 a barrel on Tuesday.

“Oil will remain unstable because of speculation over the Fed’s quantitative easing,” said Yusuke Seta, a commodity sales manager at New edge Japan.

Uncertainty over demand growth and the weakness in the dollar will keep Brent trading in a tight range between $100 and $105 over the next few days, Seta said.

The latest U.S. data supports expectations that economic growth in the second quarter will slow from the 2.4 percent rate posted in the first three months of the year, partly due to tighter fiscal policy in Washington. (Full Story)

It followed figures showing factory activity in China, the world’s second-biggest oil consumer, shrank for the first time in seven months in May. Full Story}

“Fundamentally oil is very weak,” Seta said. “Supplies are ample and demand growth is slowing.”

Still, some investors are focusing on the implications of the U.S. data on the Fed’s stimulus programmed in light of recent comments by policymakers leaning towards a cut in bond buying.

“While a weaker manufacturing index in the world’s largest economy might normally trigger concerns about commodity demand, in this case it has cast doubt on the possibility that the Fed will begin to taper monetary policy in the near term,” Ric Spooner, chief market analyst at CMC Markets, said in a note.