UPDATE 3-Brent slips towards $121; China growth lags forecast

Fri Apr 13, 2012 3:20am EDT

Related Topics

* China grew at weakest pace in nearly 3 years in Q1

* Saudi Arabia determined to cool high oil prices

* Brent to edge up to $122.62 -technicals

* Coming Up: Fed's Ben Bernanke speaks; 1700 GMT (Updates prices)

By Manash Goswami

SINGAPORE, April 13 (Reuters) - Brent crude futures slipped towards $121 on Friday as demand growth worries resurfaced after China's economic expansion lagged expectations, while caution ahead of talks between Iran and world powers capped losses.

The world's second-largest economy grew at its weakest pace in nearly three years in the first quarter, with the annual rate of expansion easing to 8.1 percent. This weighed on prices as the market had positioned for the growth numbers to top forecasts.

Front-month Brent crude, which is expiring later in the day, slipped 47 cents to $121.24 a barrel by 0438 GMT, after settling $1.53 higher. The contract is poised to post a fourth straight weekly decline, matching a similar losing streak in September.

U.S. oil declined 33 cents to $103.31 a barrel after settling 94 cents higher at $103.64. For the week, the benchmark is expected to remain unchanged for the second time in a row.

"We do expect prices to come off a bit because the market had expected China's growth to top forecasts," said Ben Le Brun, market analyst at OptionsXpress. "But even at this level, it is higher than what the government expects growth to be. I don't see it as a major cause of worry."

China's GDP growth number matched the 8.1 percent posted in the second quarter of 2009, when policymakers in the world's second-biggest economy were rolling out 4 trillion yuan ($635 billion) in stimulus measures to counter the financial crisis that had driven global trade to a virtual halt.

Global demand for China's exports may remain sluggish into mid-year, with much of the euro zone seen in recession and weak jobs data last week reviving concerns over the strength of U.S. economic recovery.

Asian shares pared early gains, while London copper fell nearly 1 percent and gold edged lower following the China data.

China's implied oil demand rose 3.4 percent in March from a year earlier to 9.46 million barrels per day (bpd), the lowest in five months, Reuters calculations based on preliminary government data showed on Friday.

The daily rate was 200,000 bpd, or 2 percent, lower than the 9.66 million bpd in February, which was the second-highest level on record, Reuters figures showed.

SAUDI ARABIA

Top oil exporter Saudi Arabia reiterated on Friday that it was determined to bring down high oil prices and was working with fellow OPEC members towards that goal.

"We are seeing a prolonged period of high oil prices," Oil Minister Ali al-Naimi said in a statement during a visit to Seoul. "We are not happy about it. (The Kingdom of Saudi Arabia) is determined to see a lower price and is working towards that goal."

Higher output from Saudi Arabia and weaker demand growth have broken a two-year cycle of tightening supply conditions in the oil market, the International Energy Agency said in its monthly report on Thursday.

Still, capping the slide in prices was caution ahead of talks between Iran and five permanent members of the U.N. Security Council plus Germany about Tehran's disputed nuclear programme.

The major powers want Iran "to demonstrate, clearly, in the actions they propose that they have truly abandoned any nuclear weapons ambitions", U.S. Secretary of State Hillary Clinton.

Brent will edge up to a resistance at $122.62 per barrel before starting a correction, while U.S. oil is expected to end the rebound from the April 10 low of $100.68 around resistance at $104.45 per barrel and then start a correction, according to Reuters technical analyst Wang Tao.

Investors would look for further indications on additional monetary stimulus, or quantitative easing, when U.S. Fed Chairman Ben Bernanke speaks later in the day.

"Any comments from Fed officials which toe the official line on no change till late 2014 will sap the greenback of buying demand and allow the oil price to rise," Tim Waterer, senior trader at CMC Markets, said in a report.

U.S. Federal Reserve officials on Thursday suggested the economy would have to deteriorate for the central bank to consider additional monetary stimulus, while they also hinted at the possibility of further action. (Additional reporting by Florence Tan; Editing by Sugita Katyal)

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