WTI futures remain over $100 on US winter demand, weak dollar

West Texas Intermediate crude remained firm over the $100-mark buoyed by a weak dollar and as frigid weather across the US stoked heating demand. Signs of stabilizing economic activity in China, a further decline in Libyan crude output and optimism for the US economys recovery outlook also kept prices underpinned. Talks between Iran and six world powers to reach a final agreement on curbing the Islamic republics nuclear program are starting today.

On the New York Mercantile Exchange, WTI crude for settlement in March traded at $100.66 per barrel at 8:02 GMT, up 0.36% from the last settlement on Friday. Prices held in a range between $100.23 and $101.13 per barrel. Yesterdays transactions will be booked today for settlement purposes due to the Presidents Day holiday on Monday.

Meanwhile on the ICE, Brent futures for delivery in April fell by 0.04% to $109.14 per barrel and held in a narrow daily range between $109.02 and $109.22. The European benchmark added 0.1% on Monday, having touched a one-week high of $109.40 per barrel.

The oil market continued to draw support as persisting cold weather in the US kept heating demand high, having drained the nations distillate fuel inventories for five consecutive weeks. The Northeast and Mid-Atlantic may see even more snow today as a winter storm passes through the Midwest.

Prices were also underpinned by a weaker dollar. The US dollar index, which measures the greenbacks performance against a basket of six major currencies, was mostly unchanged at 80.185 at 7:46 GMT. The March contract was flat on Monday after it had fallen to 79.990, the weakest level since mid-December. The US currency gauge slid by 0.7% last week, which followed a 0.8% decline in the preceding five-day period. Weakening of the greenback makes dollar-denominated commodities cheaper for foreign currency holders and boosts their appeal as an alternative investment.

Ric Spooner, chief analyst at CMC Markets in Sydney, said, cited by CNBC: “Theres obviously general support from the cold weather and support is also coming from the U.S. dollar weakness. On the other hand, the general run of disappointing economic statistics from the U.S. including retail sales and non-farm payroll was probably a consequence of cold weather. Market will be more comfortable when we get through the cold weather and see those figures return to trend levels.”

The Federal Reserve reported on Friday that industrial production in the US contracted by 0.3% in January, confounding analysts’ expectations for a 0.3% growth, which would have matched December’s expansion rate. Manufacturing output slid by 0.8%, the biggest drop in 4-1/2 years, missing analysts’ projections for a minor 0.1% advance.

The Commerce Department’s Census Bureau reported earlier in the week that retail sales in the United States surprisingly contracted by 0.4% in January, confounding economists’ forecasts for a 0.3% increase.

A separate report by the Labor Department showed that the number of people who filed for initial unemployment benefits in the week ended February 8th rose to 339 000, defying analysts’ projections for a drop by 1 000 to 330 000 from the previous period.

However, better-than-expected consumer confidence in the US spurred bullish sentiment. The Thomson Reuters/University of Michigan preliminary consumer sentiment index rose to 81.2 in February, defying analysts’ forecasts for a drop to 81.5 from January’s final reading of 81.2. The survey’s six-month expectations index jumped to 73 from 71.2 last month.

China, Libya

Also giving the oil complex a lift, data from China showed that banks loaned out the biggest amount of money in four years in January, suggesting the Asian economy is not slowing down as much as some economists feared. This comes after surprisingly upbeat China trade data also fanned positive sentiment as the country’s exports and imports exceeded projections, while crude imports rose to a record 6.63 million barrels per day, up 11.9% from a year earlier.

Market players are now awaiting HSBC’s preliminary manufacturing PMI reading, due on Thursday, which is expected to show a slight improvement but will likely remain in the contraction zone.

Worries on the supply side also aided crude, as Libyas nationwide output slid to 390 000 barrels per day after protesters partially cut flows from the western El Sharara oilfield, the state-run National Oil Corporation said. Thats down 70 000 bpd from a week earlier and below the previous stable rate of 600 000 bpd. However, three of the nation’s eastern export terminals remain shut after rebels seized control over them in the summer.

Market players are also eyeing the upcoming round of talks between Iran and six world powers aimed at reaching a final long-term accord on curbing the Persian Gulf nations nuclear program in exchange for lifting tough economic sanctions. A positive outcome would pave the way for the return of around 1 million bpd of Iranian oil to the global markets in the futures, which would drag on crude prices.