Brent crude dips but analysts expect renewed push to $120 a barrel
BY BEN WINKLEY
LONDON -- Brent crude-oil futures fell slightly in London trading Monday, having failed to hold above $119 a barrel at the end of last week, but the move is broadly seen as a brief dip as the grade' s near four-week price rally is expected to continue.
The front-month March Brent contract on London' s ICE futures exchange was down 47 cents at $118.43 a barrel. The front-month March light, sweet crude contract on the New York Mercantile Exchange was trading 10 cents lower at $95.62 a barrel.
The $120-a-barrel level for Brent is still within striking distance, said Francis Bray, Dow Jones' chief technical analyst for Europe, with Friday' s close at $119.17 a barrel effectively the last line of defense. For WTI, the downside risk is limited from the newly established range of $95.04-$97.23 a barrel, with bulls likely to try to force a break above Friday' s $96.57 a barrel.
The two global benchmarks have broadly disconnected again early this year, with the spread--the price differential between the two--widening to over $23 a barrel early Monday.
The tone in the market remains mostly bullish, after strong crude-import numbers from China Friday, with supply uncertainty still very much at the forefront of investors' minds and a lot of speculative demand in the market.
Prices won' t fall dramatically "unless speculators are convinced that the event risk upside potential is diluted," said David Hufton, of PVM. With the Iranian nuclear situation unresolved, Syria in meltdown and oil-focused terrorism back on the agenda as the Arab Spring evolves, "there is no dilution in sight," Mr. Hufton said, provided fears of financial meltdown don' t resurface.
Actual or perceived supply constraints mean the price of Brent will have to stay high for there to be a downward adjustment in demand, said analysts at Bank of America Merrill Lynch, who warned that Brent could spike to $130 a barrel this year as global gross domestic product growth accelerates in the second half of the year amid limited supplies of oil.
Dow Jones Newswires