Brent rises towards $111 as China growth vow triggers buying

SINGAPORE (Reuters) - Brent crude futures rose towards $111 per barrel on Tuesday, bucking a five-day losing streak on bargain buying after China pledged to keep its economy growing at 7.5 percent.

Modest gains suggested there are still concerns in the medium-term, including rising supplies, a fiscal crisis in the United States and the continuing crisis in the euro zone.

Front-month Brent crude futures rose 45 cents to $110.55 per barrel at 0310 GMT, while U.S. crude added 28 cents to $90.40.

Brent tested its 2013 low in the previous session, dropping as low as $109.58, the lowest since January 17. U.S. crude hit its lowest since December 26 at $89.33 per barrel.

"I would call this move in the oil markets as bargain hunting rather than any change in the outlook," said Ker Chung Yang, senior investment analyst at Phillip Futures in Singapore.

"But China is showing some signs of confidence which has resulted in the rebound today."

China will boost fiscal spending this year to deliver economic growth at 7.5 percent, outgoing premier Wen Jiabao said on Tuesday ahead of the country's annual parliamentary meetings.

The statement negated demand concerns that arose in the world's No. 2 oil market after purchasing manager surveys over the weekend suggested growth in China's key manufacturing and service sectors may be slowing.

China's factory growth as well as services growth slowed to multi-month lows, two purchasing manager indexes (PMI) showed, suggesting moderating growth in the economy.

PMIs in Europe also showed problems are ongoing there.

The euro zone's factory PMI numbers show that Germany, Europe's largest economy, and Ireland were the only two countries in the 17-nation bloc to see growth. PMIs from Spain and Italy showed activity in their factory sectors deteriorated again with the situation worsening in Italy.

In the United States, about $85 billion of automatic spending cuts that came into effect on Friday threw a cloud of uncertainty over growth prospects in the world's largest economy. The International Monetary Fund estimates that the cuts, if fully implemented, will shave 0.5 percentage points from the U.S. growth rate.

At the same time, oil supplies across the world are rising, with a survey last week showing that production from the Organization of the Petroleum Exporting Countries (OPEC) increased in February, for the first time in four months.

U.S. crude inventories may have climbed last week for a seventh straight week, according to a Reuters survey ahead of the release of weekly inventory data from the American Petroleum Institute later in the day.

Simmering tensions in the Middle East, especially between Israel and Iran over the latter's nuclear program as well as the prolonged civil unrest in Syria and Egypt may underpin prices in the long run, traders said.

Source: http://news.yahoo.com/brent-rises-towards-111-china-growth-vow-triggers-045904644--finance.html

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