* Slowing U.S. GDP growth raises quantitative easing
prospects
* U.S. dollar hits two-month low, supports commodities
* Spanish economy slips into recession
* OPEC output at highest level since 2008 -Reuters survey
(Adds OPEC survey, ICE data, Chicago PMI)
By Claire Milhench
LONDON, April 30 (Reuters) – Brent crude oil prices slipped
but held above $119 per barrel on Monday as the prospect of a
third round of liquidity stimulus by the United States continued
to support commodities despite slower economic growth around the
globe.
Brent June crude futures were down 35 cents to
$119.48 a barrel by 1352 GMT, on track to close down for the
second consecutive month. U.S. crude was down 80 cents at
$104.13 a barrel.
Analysts and traders said the market was effectively trading
sideways following data on Friday that showed
slower-than-expected U.S. GDP growth in the first quarter,
raising expectations of a fresh liquidity injection.
The Chicago purchasing management index for April came in at
56.2, missing a consensus forecast for 61, and lower than
March’s 62.2.
James Zhang, energy analyst at Standard Bank, said the
market was in a cautious mood ahead of a heavy week for U.S.
data releases.
“The market is undecided, but if anything there is a
slightly bearish bias given that the weekly U.S. jobless report
has disappointed over the last few weeks. That potentially
points to a downbeat non-farm payroll report on Friday,” he
said.
But he added that whenever U.S. data show signs of weakness,
the market sees a greater possibility of another round of
monetary easing.
“So we are getting a tug-of-war between what is going on in
the real economy and what the central banks might do with
monetary policy. Prices will swing up and down within a fairly
narrow range for a bit unless the data really surprises,” he
suggested.
In Europe, Spain’s economy 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. This may limit oil price moves.
“It’s still in the same range as Friday and because of the
European holiday tomorrow, a lot of people are out today as
well, which is making the market very quiet,” said Christopher
Bellew, a trader at Jefferies Bache in London. “It’s very much
sideways at the moment.”
Analysts expressed surprise at how well oil was holding up
given the bearish newsflow of the past few weeks.
“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,” said Carsten Fritsch, an
energy analyst at Commerzbank in Frankfurt.
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.
OPEC output in April hit its highest level since 2008 as
extra crude from Iraq, Saudi Arabia and Libya more than
compensated for the lowest Iranian supply in two decades ahead
of an EU embargo, a Reuters survey found on Monday.
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.
Meanwhile, data from the IntercontinentalExchange (ICE)
showed that speculators turned bearish on the outlook for Brent,
cutting back their net long positions as Brent futures prices
dipped.
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.
(Additional reporting by Florence Tan in Singapore; Editing by
Anthony Barker)
