Brent gains on positive US job data

Tokyo: Brent crude edged up towards $105 (Dh386) per barrel on Monday, after data from top oil consumer the US showed an improvement in hiring although not enough to ignite fears about near-term tapering of the Federal Reserve’s massive stimulus.

Markets have been on edge in recent weeks amid concerns the Fed will roll back its stimulus, a key driver of investment in commodities and other riskier assets. Speculation that Friday’s jobs data would disappoint and raise worries about the US economy had also hit investor sentiment.

But US employers stepped up hiring by a little more than expected in May, although the jobless rate remained well above pre-recession levels and May marked the third straight month that payrolls rose by less than 200,000.

The report showed an economy still in need of the Fed’s monetary support, but one which could be strong enough by September for the US central bank to ease up on its bond-buying stimulus, many economists said.

“The Fed, however, is likely to err on the side of caution, which means even a decision to taper QE in September will be data dependent,” Jason Schenker, the president of Prestige Economics said in a note.

Brent oil rose 6 cents to $104.62 a barrel by 5.07am GMT, after hitting $104.76 earlier. US oil rose 9 cents to $96.12 per barrel.

Prices also drew support from concerns about Sudan cutting oil exports from South Sudan, said Victor Shum, managing director, downstream energy consulting, at IHS in Singapore.

Sudan edged back from a day-old order to block all oil exports from South Sudan on Sunday, saying it could reverse its decision if its neighbour stopped backing rebels.

The standoff is a stark reminder of the unpredictability of this small but, for China and other Asian buyers and producers, still significant corner of the crude industry.

According to technical charts, Brent may rise to $105.34 as it has broken above resistance at $104.26, while US oil may to rise to $97.04, Reuters market analyst Wang Tao said.

But oil price gains may be limited because the market is looking well supplied later in the year, said Shum.

“There is broad market recognition that oil supply is racing ahead of demand with strong non-OPEC supply growth,” Shum said, adding that Brent will probably trade below $100 on average in the second half.

The Organisation of the Petroleum Exporting Countries (Opec), which pumps more than a third of the world’s oil, has little room to pump more due to a US oil boom that has sparked competition for market share in Asia and set off a rivalry between the Opec’s top two producers Saudi Arabia and Iraq.

Oil prices may also be pressured by bleak data from China, the world’s top energy consumer, that showed weakness in May exports and domestic activity struggling to pick up.