Crude oil futures edged up slightly on Monday in thin trade, reversing earlier losses, as the market digested mixed economic and industry data from the United States and China, the world's biggest oil consumers.
China's annual GDP growth slowed to 7.5 percent in the second quarter of 2013, the ninth quarter in the last 10 that the rate has fallen, official data showed. However, China's implied oil demand rebounded in June to the highest in four months as refineries returned from maintenance.
In the United States, data showed retail sales rose less than expected in June, adding to signs of a slowdown in economic growth, while a separate report showed the New York Federal Reserve's "Empire State" general business conditions index rose, indicating expansion in the region's factories.
"The market's made substantial gains in the last couple of weeks and it's priced in the three main drivers for the time being," said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut.
"The Fed isn't going to be stepping back on stimulus, there was a 20 million barrel drop in crude oil stocks in the U.S., and events in Egypt are calming down. Now it's a question of what force is going to come in and drive prices higher?"
Brent crude front-month rose 28 cents to settle at $109.09 a barrel, after earlier falling below $108 a barrel. The August contract expires on Tuesday.
U.S. oil rose 37 cents to end at $106.32 a barrel after sliding below $105 earlier in the session, following the release of the U.S. retail sales data.
Trading volume in both contracts was lighter than average, with U.S. crude volumes 36 percent lower than the 30-day moving average, and Brent volumes 7 percent lower.
Both Brent and U.S. crude have rallied throughout July as U.S. demand appeared to strengthen during the summer driving season, just as production glitches and tensions in Egypt raised doubts about the reliability of international supply.
Analysts attributed some of the rally to seasonal mismatches.
In a note from Citi Research, analysts wrote, "The crude market is currently trading the peak of refinery throughput and the seasonal trough of North Sea loadings. In other words, this may be the most bullish point of the year for global crude markets."
Citigroup analysts revised upward its 2013 and 2014 price forecasts for crude oil, saying the market looked to be in good shape as refiners emerge from maintenance and global "refining throughput heads to its summer peaks."
Citi Research raised its 2013 average price forecast for West Texas Intermediate crude to $95.90 a barrel from $90, and its 2014 forecast to $91.80 from $83. It raised its 2013 Brent crude price forecast to $105.3 a barrel from $104, and its 2014 forecast to $97.50 from $93.
Until Thursday, U.S. crude had been outperforming Brent for nine of 10 sessions, narrowing Brent's premium to U.S. crude <CL-LCO1=R> to a 2-1/2 year-low of $1.32 on Thursday. It widened out to $3.46 on Monday before closing at $2.77.
Dow Jones news wires, citing unnamed sources, reported on Monday that the Organization of the Petroleum Exporting Countries could cut its 30 million barrel-per-day (bpd) production by 500,000 bpd in December, which traders said also may have bumped Brent a bit.
"That may have had a little impact on Brent crude, but it's a long time until December, and OPEC will often send out trial balloons by unnamed sources and see how the market reacts," said Phil Flynn, an analyst at Price Futures Group in Chicago.
THE BULLS ARE BACK
Hedge funds and other large speculators have piled in to catch the upside. Data from the IntercontinentalExchange (ICE) showed that speculators increased net long positions in Brent crude oil futures in the week to July 9.
On Friday, U.S. Commodity Futures Trading Commission (CFTC) data showed money managers boosted their net long U.S. crude oil futures and options positions to the highest since record bullish bets were set two years ago.