Brent steady above $107, China, US data spur demand hopes

Brent crude held above $107 a barrel on Monday, snapping five straight days of losses, as promising data from the world's top two oil consumers revived hopes for growth in demand in a well-supplied market.

China's crude imports rose to the second highest daily rate on record in November, providing further evidence of a sustained recovery after data over the weekend showed refinery runs in the country rose to a new high.

Riskier assets, such as Asian shares and base metals, also took heart from strong US jobs data as well as a pick up in China's factory output and retail sales growth to eight-month highs.

Brent gained 49 cents to $107.51 a barrel by 0443 GMT, ending its longest losing streak since early November. Brent shed almost 4% in the previous week.

US oil gained 24 cents to $86.17, reversing four straight days of declines.

"It does appear, based on the evidence of the data, that the Chinese economy has bottomed out," said Ben Le Brun, a market analyst at OptionsXpress in Sydney.

"Being the world's second-largest oil consumer, indications of a sustained recovery in China's economy will be supportive for oil prices."

China, the world's largest crude buyer after the United States, imported about 5.69 million barrels per day of oil last month. That was 110,000 bpd above October and just below an all time high at 5.98 million bpd in February this year.

Data over the weekend showed the country's refinery runs rose 9.1% to 41.61 million tonnes, or 10.125 million bpd, from a year earlier as companies started new refining units.

"Investors are slightly more optimistic about China's economic recovery than before and that is supportive for oil," said Ken Hasegawa, a commodity sales manager at Newedge Japan.

China's factory output and retail sales jumped in November as consumer inflation bounced off 33-month lows, indicating the country is enjoying an enviable mix of benign inflation and rebounding economic growth.

"The industrial production and retail sales data China released over the weekend build on the picture painted by recent data which suggests that China's economy has turned the corner and is growing at over 7.5% annually," said Ric Spooner, chief market analyst at CMC Markets, in a report.

The data followed numbers out of the United States that showed the unemployment rate fell to a near four-year low of 7.7%, defying predictions that Superstorm Sandy would deal a big blow to the labour market.

Market Outlook

Investors are now awaiting outcome of a meeting of the US Federal Reserve. The majority of economists in a Reuters poll on Friday expect the US central bank to announce a new round of Treasury securities purchases at its policy meeting next week, with half the respondents saying they expected the buying to be worth $45 billion per month.

The market will also watch for comments on the supply outlook in the upcoming meeting of the Organization of the Petroleum Exporting Countries on December 12.

The group is expected to stick with an output target of 30 million bpd agreed a year ago despite high stockpiles and slowing demand growth because turmoil in the Middle East has kept prices above $100 for most of this year.

"Ample supplies of crude and an overall uncertainty about the global economy is putting pressure on prices," Hasegawa said. "The OPEC is not likely to change output quotas this time to keep any price increases in check.

Hasegawa expects both the contracts to trade in a tight range, with the European marker between $105-$111 a barrel for the rest of the month and the US benchmark at $84-$89.