Brent slips further below $111; China shows uneven recovery

SINGAPORE (Reuters) - Brent futures slipped further below $111 on Monday as the latest data from China pointed to an uneven economic recovery in the world's second-biggest oil consumer and raised demand growth concerns, while a stronger dollar put more pressure on prices.

Data showing inflation at a 10-month high in February and weaker factory output and consumer spending stoked worries that China's economy may need policy tightening before industrial output and retail sales regain momentum. But the likelihood of the numbers being distorted by the long annual Lunar New Year holidays helped stem further losses.

Brent crude fell 35 cents to $110.50 a barrel by 0521 GMT, after ending last week marginally higher to snap three straight weekly losses. U.S. oil slipped 21 cents to $91.74, after ending 39 cents higher on Friday.

"The response to the Chinese numbers is fairly limited, which is appropriate because the data is difficult to interpret due to the impact the holidays may have had," said Ric Spooner, chief market analyst at CMC Markets in Sydney. "China's growth story overall remains intact as the authorities will do whatever they can to ensure they maintain 7.5 percent growth."

Data from the National Bureau of Statistics showed the consumer price index rose 3.2 percent from a year ago, versus expectations of a 3.0 percent rise. Annual industrial production (IP) growth in January and February combined at 9.9 percent was the lowest since October 2012 - the starting point of China's nascent economic recovery.

The inflation number may make it difficult for China's central bank to keep an easy policy for long, but any move to tighten may only come after several months of rise in costs given that the nascent economic recovery.

"We think the People's Bank of China's (PBOC) easing window has closed, but whether the tightening window will open soon would likely depend on the inflation dynamics in the coming months," analysts at Credit Suisse said in a report.

"We think the PBOC will remain hesitant about tightening given the current state of the economy."

Prices are also under pressure from a stronger dollar. The dollar hovered near a 3-1/2-year high against the yen and held an upper hand against other major currencies after a remarkable growth in U.S. employment. A stronger greenback can weigh on dollar-denominated commodities such as oil.

OUTLOOK

U.S. employers added a greater-than-expected 236,000 workers to their payrolls in February and the jobless rate fell to a four-year low, data from the Labor Department showed on Friday, offering yet another signal of a recovery.

"We may see the dollar strengthening somewhat following the series of positive data from the United States," Spooner said. "But over a longer term, the dollar will remain weak because of the Fed's policies."

Brent is biased to revisit its March 8 low of $109.14 as indicated by its wave pattern, a Fibonacci projection analysis and a falling channel, while U.S. oil is expected to rise to $92.68, Reuters technical analyst Wang Tao said.

The market was also supported by renewed geopolitical worries in the Middle East. Syrian rebels broke through government lines to ease a siege of their positions in the strategic central city of Homs despite coming under fierce aerial bombardment, opposition campaigners said.

Syria isn't key to the oil market, but investors have long worried the unrest may spread to other major oil exporters. Tensions in the Middle East over Iran's controversial nuclear programme have kept Brent futures above $100 through most of 2012 and this year.

Source: http://news.yahoo.com/brent-slips-further-below-111-china-shows-uneven-060614420--finance.html

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