Oil steadies above $116 on outlook

Positive US employment numbers and confirmation of a mild recovery in China, supported by purchasing manager surveys, allayed some concerns about weak fuel demand from the world’s two biggest oil users.

“We are now seeing a consistent story of moderate growth in the US and China, which is supportive of oil prices in general,” said Ric Spooner, chief market analyst at CMC Markets in Sydney. “This will probably be a week of consolidation.”

Brent traded 25 cents lower at $116.51 per barrel at 0728 GMT, holding near a 4-1/2 month high of $117.07 reached on Friday. Brent has risen for three straight weeks.

US crude slipped 31 cents to $97.46 per barrel, after rising for eight consecutive weeks, the longest such winning streak since July-August 2004.

Brent’s premium to US crude widened to above $19 per barrel on Friday, a level last seen in early January, on swelling inventories in Cushing, Oklahoma.

Traders expect stocks at Cushing to keep building as the Seaway pipeline, which had been expected to absorb some of those stocks, may not be able to run at full capacity until the second half of the year.

“I won’t be surprised to see (the widening differential) continue as the market is still adjusting for the fact that Seaway’s (drawdown) won’t be as much as anticipated,” Spooner said.

The global economic outlook brightened considerably last week after US payrolls rose by 157,000 last month, with upward revisions for November and December, while the Institute for Supply Management said its index of national factory activity rose to its highest since April.

“The job market is healthier than we had previously thought,” said Jason Schenker, president, of Prestige Economics. “The outlook is positive and one of increased growth in the year ahead.”