Oil retreats, dragged by weak Europe economy data

Oil eased slightly on Wednesday from a nine-month high as weak economic data in Europe and China cast doubt on the outlook for global growth and prospects for fuel demand.

Brent crude for April delivery fell 33 cents to $121.33 a barrel by 1203 GMT. The contract settled at $121.66 on Tuesday, its highest since May.

US crude for April was down 60 cents to $105.69 a barrel. The March contract, which expired on Tuesday, closed at $105.84 a barrel, the highest settlement for front-month Nymex crude since May 4.

The euro zone’s service sector shrank unexpectedly this month, reviving fears the economy could sink into recession, Markit’s Eurozone Services Purchasing Mana-gers’ Index showed on Wednesday.

China’s manufacturing sector contracted in February for a fourth straight month as new export orders dropped sharply in the face of the euro area debt crisis, stirring fears about fuel demand in the world’s second-largest oil user.

Evidence that the poor economic situation is directly impacting the fuel market came from Singapore Airlines, which cut its cargo capacity by 20 per cent as persistent weakness in demand and high jet fuel prices piled pressure on its profitability.

However Brent was not far off nine-month highs, and investors were still upbeat on the outlook for oil.

“There’s relatively little responsiveness to negative data, and there is not a huge appetite to take a bearish stance,” said Nick MacGregor, oil analyst at Redmayne Bentley.