Brent steadies below $103 as demand outlook dims

By Ramya Venugopal

CHENNAI, India (Reuters) - Brent crude held below $103 per barrel on Tuesday amid worries about the global economy and ample supply, while some traders said the onset of the summer driving season in top oil consumer the United States may support prices.

A contraction in Chinese factory activity and a buildup in U.S. gasoline inventories have been dragging on oil prices, with analysts saying Brent could drop further.

"Oil demand from China could be depressed as China's PMI contracted for the first time in seven months and we are unlikely to see any aggressive stimulus from policymakers in the short-term," said Chen Hoay Lee, an investment analyst at Phillip Futures in Singapore.

"We continue to be bearish, with Brent likely to find support at the 100 level."

Brent was up 25 cents at $102.87 per barrel at 0719 GMT, while U.S. crude slipped 33 cents to $93.82.

Oil markets are also waiting for direction as traders in Europe and the United States return after a holiday weekend.

Further clues on the health of the global economy may come from China's final PMI numbers this weekend, as well as a spate of data from Beijing next week.

According to preliminary data, U.S. factory activity also slipped to a 7-month low in May.

"Oil markets appear to be more interested in broader economic signals in the U.S. and China for a view on demand," ANZ analysts said in a report.

Still, some traders said the start of the U.S. summer driving season could draw down some of the country's gasoline inventory, which is currently close to the highest level for this time of year since 1999.

"The demand season has started in the U.S. and I think we can say oil prices may have bottomed out," said Tetsu Emori, a commodity fund manager with Astmax Investments in Tokyo.

"The global economy is looking stable and I don't expect the Fed to stop its QE programme this year," Emori said, referring to fears the U.S. Federal Reserve could begin scaling back its stimulus programme earlier than expected.

Traders are also shifting their focus to a meeting of the Organization of Petroleum Exporting Countries (OPEC) on Friday, even though the producer cartel is not expected to alter its output target.

Source: http://news.yahoo.com/brent-steadies-below-103-demand-outlook-dims-073328412.html

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