LONDON (Reuters) - Oil prices held steady above $102 a barrel on Monday, supported by weekend comments from China’s Premier Wen Jiabao that the government would step up its efforts to boost the economy of the world’s second-largest oil consumer.
Brent crude was up 16 cents to $102.56 a barrel by 1211 GMT. Prices settled $1.33 higher on Friday. U.S. oil was down 52 cents to $86.58 a barrel, after ending $1.02 higher on Friday.
Oil prices rallied on Friday after China’s second-quarter GDP figures were not as bad as some had feared, dispelling worries that the country was heading for a hard landing.
On Sunday, China’s official Xinhua news agency quoted Wen as saying that measures to stabilise the economy were working and the government would step up efforts in the second half of the year to support the economy, sparking expectations of further easing.
“Short-term sentiment should be good for oil as well as other risk assets. It is a combination of two factors -- China’s growth coming in in line with expectations and hopes for more measures to boost the economy,” said Ben Le Brun, a markets analyst at OptionsXpress in Sydney.
Also on Sunday, Iran renewed its threats to block the Strait of Hormuz, a conduit for 40 percent of the world’s seaborne oil exports, unless sanctions against it were revoked.
However, it is unclear how it could shut down the channel given the significant U.S. military presence there. [ID:nL6E8IF2LB] In addition, the United Arab Emirates has loaded its first cargo from its new oil export terminal, which provides an alternative export route [ID:nL6E8IF1XU].
Analysts in Europe expressed surprise that oil was holding on to Friday’s gains, despite a strengthening U.S. dollar .DXY, which should weigh on prices.
“Given the bleak fundamental situation, with continued oversupply and weak demand, oil prices are showing remarkable strength staying above $100,” said Carsten Fritsch, an energy analyst at Commerzbank in Frankfurt.
Michael Hewson, market analyst at CMC Markets in London, said Friday’s rally was “completely unjustified” and had been achieved on pretty thin volumes. “I‘m surprised it’s as high as it is on Brent -- the demand doesn’t justify the price.”
The market is awaiting the release of the International Monetary Fund’s world economic outlook, due later on Monday.
Hewson said the IMF was likely to revise its global growth forecast down after revising it upwards in April. The UK, U.S. and Europe are all expected to be in focus, with developed market problems beginning to impact emerging market growth.
“The trend is muted economic activity, given the drag that’s occurring in Europe, and that will be reflected in the IMF’s forecast this afternoon,” he said.
Speculators cut their net long positions in Brent crude futures and options in the week to July 10, data from the IntercontinentalExchange (ICE) showed.
In the U.S., money managers cut their net long U.S. crude futures and options positions in the week to July 10, the U.S. Commodity Futures Trading Commission (CFTC) said late on Friday.
Fritsch said the decline was not that significant. “The net longs are at rather low levels and so there’s an argument that prices could bottom out and we could see a recovery further down the road.”
Additional reporting by Manash Goswami in Singapore; Editing by Alison Birrane and James Jukwey