* Slowing U.S. GDP growth raises hopes of QE3
* U.S. dollar hits two-month low, supports commodities
* Spanish economy slips into recession
(Adds fresh quotes, updates prices, previous SINGAPORE)
By Claire Milhench
LONDON, April 30 (Reuters) – Oil prices held steady above
$119 per barrel on Monday as the prospect of a third round of
liquidity stimulus by the United States and a weaker dollar
continued to support commodities despite slower economic growth
around the globe.
Brent June crude futures were down 48 cents to
$119.35 a barrel by 0921 GMT, on track to close down for the
second consecutive month. U.S. crude was down 35 cents at
$104.58 a barrel.
Analysts said the market was effectively trading sideways
following data on Friday which showed slower-than-expected U.S.
GDP growth in the first quarter, raising hopes of a fresh
liquidity injection.
“There are two factors at play that are preventing another
sharp drop at the moment – the weaker U.S. dollar and the
expectation that the Fed will come up another round of
quantitative easing,” said Carsten Fritsch, an energy analyst at
Commerzbank in Frankfurt. “That is supporting commodity prices.”
The dollar hit a two-month low against a basket of
currencies on Monday. A weaker dollar
makes commodities priced in dollars more affordable for buyers
using other currencies.
The dollar is likely to come under more pressure if this
week’s data, including the key U.S. jobs numbers, disappoints.
“If growth in the U.S. is going to be weaker than the Fed
and the market expect, then the Fed will have to act,” said
Jeremy Friesen, a commodities strategist at Societe Generale.
In Europe, data showed that Spain’s economy had slipped into
recession in the first quarter as domestic demand shrank against
a background of deep government spending cuts.
Although GDP declined 0.3 percent quarter-on-quarter and 0.4
percent year-on-year, this was not as bad as analysts had
forecast. “The Spanish GDP number, which could have been
depressing came in a bit above expectations but not much,” said
Filip Petersson, commodity strategist at SEB.
Trading volumes are expected to be fairly light today
because of the May Day bank holiday across much of Europe on
Tuesday. Analysts expressed surprise at how well oil was holding
up given the bearish newsflow of the past few weeks.
“We saw some decline last week to about $117 in Brent but
now we are back at around $120,” said Commerzbank’s Fritsch.
“This is despite the fact that tensions with Iran have eased
which should reduce the risk premium, and there are signs that
growth momentum is slowing in the two-largest oil consuming
nations, the United States and China.”
SUPPLY FACTOR
SEB’s Petersson said equity markets had run a bit ahead of
crude, which could be providing some support. But he added that
the oil supply factor should continue to weigh, with
over-production from Saudi Arabia.
“There is an Armada of tankers heading towards Asia from the
Middle East so there’s a general feeling of over-supply in the
market,” he said.
Speculator positioning in U.S. crude oil futures and options
was mixed in the week to April 24, CFTC data showed on Friday,
with traders cutting their positions on the New York Mercantile
Exchange (NYMEX) but raising them in London.
Investors will scour data on Chinese PMI on Tuesday and U.S.
employment on Friday for a better read on the economic health of
the world’s two largest oil consumers.
“Maybe the Chicago PMI data could do something later today
but I think the most interesting thing coming up now is the
Chinese PMI tomorrow,” said Petersson.
Chicago April PMI data, due out at 1345 GMT, is forecast to
ease back to 60.5 in April, from 62.2 last month.
(Additional reporting by Florence Tan in Singapore; Editing by
Alison Birrane)
