Picture: THINKSTOCK
Picture: THINKSTOCK

SINGAPORE — Brent crude held above $100 a barrel on Wednesday, supported by fear that the Organisation of Petroleum Exporting Countries (Opec) could cut supply if prices fall further, although data from major economies pointing to slower growth and fuel demand capped gains.

Oil has propped above $100 this week after calls from Opec oil hawks Venezuela and Iran for an emergency meeting ahead of one already scheduled on May 31.

Opec pumps more than a third of the world’s oil and meets twice a year to co-ordinate supply. It kept oil output limits unchanged at a meeting in December.

Brent futures edged up 26c to $100.57 a barrel by 4.25am GMT, after closing lower on Tuesday for the first time in four sessions. US oil rose 47c to $89.65.

"Saudi Arabia has said they prefer $100 Brent so expectations are if prices fell below $100, Opec would cut production," Mitsubishi Corporation risk manager Tony Nunan said.

Brent was still averaging about $110 this year, possibly easing the pressure for any output cut, while global oil markets would have passed the weakest point in annual demand by end-May, Mr Nunan said.

Technical analysis shows Brent is expected to rebound to $101.63 a barrel, driven by an upward wave c, while US oil is expected to end its current rebound at or below $90.27, Reuters technical analyst Wang Tao says.

Opec’s supply has also been constrained by a force majeure on Bonny Light crude exports at Africa’s top producer Nigeria, while Iranian oil exports are curbed by Western sanctions.

The United Nations nuclear watchdog will hold a new meeting with Iran on May 15, aimed at enabling its inspectors to resume a stalled investigation into suspected nuclear bomb research by the Islamic state.

Increased volatility

Oil also drew support from a stronger equities market.

Although settling lower, benchmark Brent ended above $100 a barrel for a second straight day, tracking share markets on a view that central banks could intensify efforts to revive a flagging global recovery after major economies lost some momentum this month.

Growth in Chinese factories slowed to a crawl as export demand dwindled, while Germany, the eurozone’s largest economy, saw business activity decline for the first time in five months.

Still, expectations the world’s biggest oil consumer, the US, could post strong GDP growth of 3% in the first quarter on Friday, after almost stalling at the end of 2012, helped provide a floor for prices.

Uncertainty over global growth may result in commodities facing volatility, ANZ analysts said in a note.

"We continue to view recent weakness in the dataflow as consolidation, rather than the start of a 2012-style capitulation, but remain watchful of the loss of momentum in the manufacturing sector from these key countries," the bank said.

Oil stocks

In the US, crude stocks fell last week as imports dropped while refined fuel inventories were mixed, data from industry group the American Petroleum Institute (API) showed late on Tuesday.

API’s data showed that crude inventories fell by 845,000 barrels in the week to April 19, compared with analysts’ expectations for an increase of 1.5-million barrels.

US government data, expected at 2.30pm GMT, will shed more outlook on the appetite for oil.

Reuters