Oil rises on snag in Iran talks, eyes weak data

Crude oil futures rebounded on Thursday from the previous session's slump as talks between world powers and Iran over its nuclear program hit a snag and resurrected fears of disruptions to oil supplies and of a new Mideast conflict.

Weak economic data from China, Europe and the United States kept buyers cautious about the shaky global economy.

Iran accused world powers of creating "a difficult atmosphere" that hindered negotiations on its atomic energy program, stalling diplomatic work to defuse fears of an Iranian attempt to develop nuclear bombs.

Chinese factory output faltered in May, according to official data, as export orders fell to two-month lows, pointing to sluggish economic activity in the first half of the year and denting the outlook for oil demand.

The euro zone sunk further into the doldrums this month as new factory orders shrivelled, forcing companies to run down backlogs and slash work forces, surveys showed.

Also worrying policymakers, the downturn that started in smaller members has spread to Germany and France, whose tepid growth had been keeping the troubled bloc afloat.

Demand for long-lasting U.S. manufactured goods rose less than expected in April while weekly jobless claims dipped only modestly, adding to worries about the economy of the world's largest oil consumer.

"The market is now betting on Iran hardening its stance again," said Tamas Varga, analyst at brokers PVM Oil Associates in London. "Given the Greek crisis, however, any rally should be fairly short-lived."

By 12:15 a.m. EDT (1615 GMT), Brent futures were up 86 cents to $106.42 a barrel. Brent earlier touched a session high of $106.94 before weak Chinese and European economic data sparked selling.

Brent crude also dropped to a session low of $105.03 earlier, the lowest intraday price since Dec. 20. At that level, Brent had fallen more than 18 percent from its 2012 high of $128.40 struck on March 1.

U.S. crude for July was up $1.21 to $91.11, after climbing to an early high of $91.52. On Wednesday, it settled at $89.90, the lowest close for front-month U.S. crude since Oct. 21. U.S. crude is down about 19 percent from its 2012 high of $110.55, also hit on March 1.

GREECE SCENARIO

European Union leaders, in an informal summit on Wednesday, pledged to support Greece remaining in the euro zone, but warned Greece had to stick to its side of its debt bailout bargain.

That situation has kept oil investors at a quandary on whether to buy back positions after recent sell-offs had left oil markets on both sides of the Atlantic in an oversold condition.

The rebounds on Thursday put the Relative Strength Index of both Brent and U.S. crude at around 28, from 23 on Wednesday, according to Reuters data, still below the 30 mark that signals oversold status.

"The overriding factor in the market remains to be whether a Greek default will cause another credit crisis and contagion across Europe," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

The euro edged up from near two-year lows against the dollar on Thursday as investors consolidated bearish bets on the common currency ahead of the long U.S. holiday weekend. But any bounce was likely to be fleeting as the market weighs the possibility of Greece exiting the euro zone.

Americans take to the road in force beginning this weekend to mark the U.S. Memorial Day holiday, with 30.7 million people expected to kick off the summer driving season, up from 30.3 million a year ago.

Source: REUTERS