Brent oil up as stimulus hope counters weak China data

NEW YORK (Reuters) - Brent crude rose while U.S. crude slipped in choppy trade on Monday as expectations the U.S. Federal Reserve will act to stimulate the economy countered weak data from China that raised concerns about demand for oil.

Some investors believe that growing signs of economic slowdown in China and in the United States have increased the likelihood that the U.S. Federal Reserve's two-day policy meeting ending on Thursday will result in a third round of monetary stimulus, known as quantitative easing or QE3.

Additional stimulus is expected to weaken the dollar, which can boost the price of dollar-denominated commodities like oil.

Brent October crude rose 9 cents to $114.34 a barrel at 12:27 a.m. EDT, having swung from $113.92 to $115.05.

U.S. October crude was down 51 cents at $95.91 a barrel, after slumping more than a $1 to $95.34. The early session peak of $96.60 was 1 cent from the $96.61 200-day moving average, a technical indicator closely watched by traders.

"The market is clearly betting on a third round of quantitative easing from the United States," said Tamas Varga, analyst at brokers PVM Oil Associates in London.

"The Chinese data were pretty bearish as were U.S. jobs figures last week. But it is a twisted logic: bad news can be good news if it leads to a positive policy response."

China's crude oil imports fell 12.5 percent in August from a year earlier to the lowest daily rate since October 2010, while implied oil demand in China fell to 8.92 million barrels per day (bpd), underlining sputtering domestic demand as the global economic outlook darkens.

China's industrial output growth slowed to 8.9 percent year-on-year in August, the weakest since May 2009, while total imports were down 2.6 percent, against expectations for a 3.5 percent rise.

SUPPLY FEARS

Maintenance in the North Sea, producer of Brent crude, has cut production this month and lent support to oil prices near term, while disruptions to U.S. Gulf of Mexico production from Hurricane Isaac continue.

Nearly 14 percent of oil output and 10 percent of natural gas production remained shut on Sunday, U.S. regulators said.

Saudi Oil Minister Ali al-Naimi said on Monday the Kingdom was concerned about rising oil prices, with Brent crude rising by more than 25 percent since late June.

"Saudi Arabia will, as always, take all necessary steps to ensure the market is well supplied and to help moderate prices - and we will meet any additional demand from our customers," Naimi said.

Production from the three big Gulf producers saw a net increase of around 400,000 bpd in August as a sharp rise in Kuwaiti output outweighed cuts by Saudi Arabia and the United Arab Emirates (UAE), Gulf industry sources said.

The possibility that the United States and other consumer governments will tap strategic oil reserves has also helped limit further price gains, traders and analysts said, especially as Hurricane Isaac briefly shut U.S. production and refining.

The violent civil war in Syria and Iran's ongoing dispute with the West over Tehran's nuclear program have fueled concerns about the potential for the region's oil supply to be disrupted.

The U.N. International Atomic Energy Agency pressed Iran on Monday to grant inspectors immediate access to the Parchin military site, where the IAEA suspects Tehran may have conducted tests relevant to nuclear weapon development.

Yukiya Amano, IAEA director general, said it was "frustrating" that the IAEA and Iran had made no concrete progress in talks that began in January.

(Additional reporting by David Sheppard in New York, Christopher Johnson in London, Osamu Tsukimori in Tokyo and Ramya Venugopal in Singapore; Editing by Marguerita Choy, David Gregorio and Bob Burgdorfer)

Source: http://news.yahoo.com/brent-climbs-above-114-u-stimulus-hopes-gains-044703924--finance.html

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