Brent steady below $112; investors eye China data, U.S. earnings

Tue Jan 8, 2013 10:07pm EST

Related Topics

* Index rebalancing pushes up Brent, drags US crude down

* China trade, U.S. earnings remain in focus

* Coming up: UK trade data for Nov at 0930 GMT

By Ramya Venugopal

SINGAPORE, Jan 9 (Reuters) - Brent futures steadied below $112 per barrel on Wednesday as cautious investors remained on the sidelines, waiting for U.S. corporate earnings figures and Chinese trade data to glean insights into the health of the world's biggest economies.

Front-month Brent futures shed 9 cents to $111.85 per barrel at 0246 GMT, after adding 54 cents on Tuesday. U.S. crude was trading up 4 cents at $93.19 per barrel.

"Oil markets are watching the U.S. fourth-quarter earnings; from a general market point of view, a good start to the Q4 earnings season will set a bullish tone in the market," said Natalie Rampono, senior commodity strategist at ANZ in Sydney.

"Markets are also keeping an eye on economic data coming up and China's trade data will be quite important."

U.S. corporate profits are expected to be higher than the third quarter's lacklustre results, but analysts' estimates are down sharply from where they were in October.

U.S. crude futures slid while Brent rose in the previous session when the annual rebalancing of the S&P GSCI commodity index kicked in, prompting index funds to adjust their portfolios accordingly.

The rebalancing, announced in early November, will increase the index's holdings of Brent and reduce holdings of WTI as the output of Brent-related grades wanes and U.S. crude output surges. The passive index rolls its holdings between the fifth and ninth trading days of the month.

ECONOMIC HEALTH

China, the world's biggest energy consumer, will release its December trade figures on Thursday. The government will also release its fourth-quarter economic growth numbers on Jan. 18.

Reuters polls predicted that the trade numbers may show a marginal improvement, although weak demand in the U.S. and European markets may weigh on China's exports. Economic growth may have accelerated, ending seven quarters of weaker expansion.

"Global economic growth is expected to ramp up this year... this should bode well for oil demand," Deutsche Bank analysts wrote in their outlook for the year released on Tuesday.

"We forecast oil prices will pick up in the 2H 2013 in line with accelerating economic growth."

The bank expects Brent to average $115 per barrel and U.S. crude to average $100 per barrel in the second half of 2013.

HIGH U.S. PRODUCTION

Weighing on prices, the U.S. Energy Information Administration (EIA) said on Tuesday that the country's crude oil production will rise by the biggest margin on record in 2013, and is set to soar by a quarter over two years.

The rapid increase underscores how improvements in horizontal drilling and hydraulic fracturing technology -- commonly referred to as 'fracking' -- have transformed the energy market in the last five years, allowing producers to tap shale oil from tight rock formations.

Adding to the pressure, the American Petroleum Institute (API) said crude stocks rose 2.4 million barrels last week, beating analysts' expectations of a 1.5 million barrel increase.

The increase was largely due to a 1.2 million barrel per day jump in crude imports, API said. (Editing by Miral Fahmy)

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