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Brent rises towards $111 on U.S. stimulus hopes

Published 09/05/2011, 11:47 PM
Updated 09/05/2011, 11:52 PM
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* Market eyeing Obama's jobs speech this week

* Chinese oil field shutdown supporting prices

By Francis Kan

SINGAPORE, Sept 6 (Reuters) - Brent crude rose towards $111 a barrel on Tuesday, rebounding from sharp falls a day earlier, as expectations for further economic stimulus in the U.S. boosted sentiment.

Front-month Brent rose 58 cents to $110.66 a barrel by 0342 GMT, after rising over a dollar earlier. Brent plunged over $2 a barrel on Monday on weak economic data from the U.S. and China.

U.S. crude was trading at $83.95 a barrel, down $2.50 from Friday's close, as there was no settlement on Monday due to a holiday in the U.S. However, it was up 34 cents from late Monday.

"The market is looking for fresh stimulus coming from Obama when he makes his jobs speech on Thursday, and also when the Fed meets on September 20th," said Gordon Kwan, head of energy research at Mirae Securities in Hong Kong.

U.S. employment growth ground to a halt in August, reviving recession fears and piling pressure on both President Barack Obama and the Federal Reserve to provide more stimulus to aid the world's top energy consumer.

On Monday, Obama previewed proposals for new infrastructure spending and an extension of payroll tax cuts as part of a major jobs package he will unveil this week.

Worsening economic data may also raise the odds of another round of bond buying, or quantitative easing, by the U.S. Federal Reserve.

Prices also received a boost from the closure of a major oil field in China due to oil leaks, which analysts expect will reduce CNOOC's total output and earnings by about 2 percent this year, raising the prospect of more Chinese crude imports.

China's State Oceanic Administration ordered the PL19-3 oilfield in the northern Bohai Bay, owned and operated by CNOOC and ConocoPhillips , to cease operations because the American firm had failed to seal a leak that had lasted for more than two months, CNOOC said on Monday.

"The event in itself is not that big, but if regulators decide to shut more platforms and oil fields after a safety review, it may result in China importing more crude," said Kwan.

Gains, however, were capped by concerns that Europe's sovereign debt problems and a slowing Chinese economy could crimp oil demand.

China's economic growth may fall below 9 percent in 2012, partly due to a weak global economy, a senior Chinese foreign exchange official said on Tuesday.

Brent oil is expected to fall to $109.01 per barrel, while U.S. oil may hover in a narrow range of $82.95-$84.20 per barrel for half a trading session or one session before plunging towards the Aug. 19 low of $79.17, according to Reuters market analyst Wang Tao.

More than half the crude production in the U.S. Gulf of Mexico remains shut due to Tropical Storm Lee, which is hindering efforts to restaff and restart oil and gas platforms in the basin.

Another hurricane, Katia, powered up to a major Category 4 storm on Monday, but was expected to veer away from the U.S. East Coast later this week, avoiding a direct hit on a seaboard already battered by Hurricane Irene. (Editing by Miral Fahmy)

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