SINGAPORE, March 10 (Reuters) – Brent futures slipped below $109 a barrel on Monday as data showing an unexpected fall in China’s exports added to fears of a slowdown in the world’s No. 2 economy, though geopolitical tensions in Ukraine and Libya limited the falls.
The sharp drop in exports stoked oil demand-growth worries as it followed a series of factory surveys since the start of 2014 that points to weakness in economic activity. Most risk assets, including Asian shares and base metals, also fell due to the weak numbers.
Brent crude LCOc1 declined 34 cents to $108.66 a barrel by 0238 GMT, snapping two straight days of gains. U.S. CLc1 fell 14 cents to $102.44, after touching a high of $102.82. It settled up $1.02 on Friday.
“Oil pulled back because of the latest data from China despite continuing tensions over Ukraine,” said Victor Shum, vice-president of energy consultancy IHS Energy Insight. “The ongoing situation in Ukraine will put a high floor on oil prices and lead to more volatility.”
Shum sees strong support for the U.S. benchmark at $100 a barrel and Brent holding around its current trading range in the short term, largely supported by geopolitical tensions.
Russian President Vladimir Putin defended breakaway moves by pro-Russian leaders in Crimea, where Russian forces tightened their grip on the Ukrainian Black Sea peninsula by seizing another border post and a military airfield.
Germany’s Angela Merkel delivered a rebuke to Putin, telling him that a planned Moscow-backed referendum on whether Crimea should join Russia was illegal and violated Ukraine’s constitution. (Full Story)
Gazprom GAZP.MM issued a warning on Friday that it could stop shipping gas to Ukraine over unpaid bills, increasing pressure on the new government in Kiev and its supporters in Europe. Gazprom had halted gas supplies to Ukraine over unpaid bills in 2009, which led to reductions in supplies of Russian gas to Europe during a cold winter. (Full Story)
“We will continue to see some back and forth between Russia and the West over Ukraine,” said Shum. “That will keep geopolitical tensions high and support oil.”
For now, oil is under pressure as combined Chinese exports in January and February fell 1.6 percent from the same period a year earlier, versus a 7.9 percent full-year rise in 2013, bolstering concerns that the data wasn’t weak due to possible distortions caused by the long Lunar New Year holiday, which began on Jan. 31 and covered early February. (Full Story)
Prices were under pressure even though China’s total crude oil imports in the first two months of the year rose 11.5 percent from a year earlier to 51.21 million tonnes, as investors saw the rise partly as a result of build up in commercial crude inventories.