Brent drops below $118, China data stokes demand fears

Reuters, Friday 10 Feb 2012

Oil prices weighed down as investors remain sceptical over looming Greek debt deal and its impact on energy demand

Brent crude slipped from a six-month high to below $118 a barrel on Friday as data from China showed a soaring trade surplus due to crumbling imports for January, stoking fears of a slowdown in demand from the world's second largest oil consumer.

Oil prices were also weighed down as investors remained sceptical on whether a Greek deal on Thursday to secure a second bailout and avoid a default would resolve the euro zone's two-year old debt crisis.

However, losses were checked as China's crude oil imports stayed firm last month, rising 7.4 per cent from a year ago to 5.5 million barrels per day (bpd), its third-highest on record.

Analysts also pointed out that the Chinese data was distorted by the week-long Lunar New Year break in January, adding that the long-term oil demand outlook from China was still positive.

"Demand has been affected by seasonal factors. We expect GDP growth to accelerate in China as the government implements more stimulatory measures, and this will be positive for oil demand," said Gordon Kwan, head of energy research at Mirae Asset Management in Hong Kong.

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