Brent steady under $104

Brent crude steadied under $104 (€79) a barrel this morning, holding on to most of its gains from the previous session as investors remained cautiously optimistic that further global stimulus measures would boost oil demand.

But prices were headed for their biggest monthly slide since May last year, after plunging to nine-month lows below $100 earlier in April amid a commodities sell-off triggered by weak economic data from top consumers the United States and China.

Brent dropped 25 cents to $103.56 a barrel by 05.12 GMT, heading for an almost 6 per cent loss this month. US crude was 11 cents lower at $94.39 a barrel, on track to end the month down nearly 3 per cent.

"We are now going to be looking at taking direction from the Federal Reserve after a really rough month, the expectation is that we should see stimulus measures continue," said Carl Larry, president of the Houston-based Oil Outlook and Opinions.

“Right now there is demand, but it’s not great, and for this economy to really kick-off to pre-2007 levels we’re going to have to really see consumption levels expand and unemployment come off.”

The US Federal Reserve kicks off a two-day meeting later in the day and traders are waiting to see if a sluggish economic recovery and a slowdown in inflation could not only end talk of tapering bond buying but actually push the central bank into buying more.

The Fed is currently buying $85 billion of debt a month and the talk had been of when it might start to scale back. However, recent string of soft data have changed the conversation.

On the other side of the Atlantic, confidence in the euro zone's economy fell further in April, strengthening the case for a cut in interest rates this week by the European Central Bank.

“Europe is a dark hole, and the displacement of demand there is not something the likes of the United States and Asia can plug, it’s just too big a gap,” Mr Larry said. “Frankly I don’t see that improving anytime soon.”

The euro zone is facing a difficult road out of recession and has seen a souring of the mood among companies and consumers since March, after an optimistic start to the year was disrupted by turmoil in Cyprus and Italy.

Traders will also closely watch this week’s data from China, the world’s No.2 oil consumer, that may show factory activity in April expanded at its fastest pace in 12 months.

The earlier private sector survey of purchasing managers, sponsored by HSBC, showed activity in China's industrial sector dipped in April as new export orders shrank.

“With China, we know growth has slowed, but I keep saying that a 7 to 8 per cent growth looks so much better than a recession,” Mr Larry said.

Reuters