Feb 12, 2013, 09.36 AM IST | Source: Reuters

Brent stays above $118, North Korea seismic activity in focus

MARKETS-OIL:Brent stays above $118, North Korea seismic activity in focus

TOKYO (Reuters) - Brent crude futures rose to stay above $118 a barrel on Tuesday in thin trade due to Lunar New Year holidays in Asia, with investors focusing on seismic activity in North Korea that South Korea said indicated Pyongyang had carried out a promised nuclear test.

South Korea's presidential office said that a quake, measured 4.9 by the U.S. Geological Survey, was "likely" a nuclear test, according to the South's Yonhap news agency.

North Korea is not prone to seismic activity, and the USGS said the epicentre was close to the North's known nuclear test site.

London Brent crude for March delivery, which expires on Wednesday, was trading 10 cents higher at $118.23 a barrel by 0306 GMT, after settling down 77 cents on Monday. Brent is down 0.8 percent from a nine-month high above $119 hit on Friday, on the back of a surge in Chinese trade in January.

U.S. crude for March delivery was down 16 cents at $96.87 a barrel.

China and Singapore are among the nations on holiday in Asia on Tuesday, with investors reluctant to take big positions.

Developments in the euro zone threaten to weigh further on equities and global oil demand. Germany, France and Italy are set to release their latest quarterly figures on gross domestic product, which are expected to point to a contraction in the three major European economies.

Oil markets were also monitoring developments in the Middle East. Israeli Prime Minister Benjamin Netanyahu said on Monday that new centrifuges Iran was installing for its uranium enrichment programme could cut by a third the time needed to create a nuclear bomb.

Diplomats believe, however, that Iran may have resumed converting small amounts of its higher-grade enriched uranium into reactor fuel thereby slowing a growth in stockpiles that could be used to make weapons.

U.S. OIL INVENTORIES

Oil markets were also focusing on weekly inventory data in top consumer the United States. U.S. commercial crude oil stockpiles are expected to have increased 2.9 million barrels last week, a preliminary Reuters poll of four analysts showed on Monday.

Distillate stocks, which include heating oil and diesel fuel, were projected to be down 800,000 barrels on average, while gasoline inventories were seen unchanged.

Industry group American Petroleum Institute releases its weekly report at 1630 EST (2130 GMT). The U.S. government's Energy Information Administration is set to follow with its own figures on Wednesday. (Reporting by Osamu Tsukimori)

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