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Brent plunges to 5-month low on China, Europe factory data

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[April 02, 2014]  By Elizabeth Dilts

NEW YORK (Reuters)  Brent crude oil futures fell in a steady slide on Tuesday to settle at nearly a five month-low as poor manufacturing data from China and Europe weighed. U.S. oil futures also fell as analysts looked toward another build in stocks Wednesday.

Chinese factory activity edged up in March, but not by enough to extinguish worries that the country, the world's No. 2 oil consumer, had a sharper-than-expected slowdown at the start of the year.

Growth in euro zone factories cooled too and companies have returned to cutting prices in order to drum up business.

U.S. oil was weighed throughout Tuesday's session by expectations that government data to be released Wednesday would show U.S. commercial crude stocks rose for 11th straight week in a row.

Preliminary data released late Tuesday by the industry group the American Petroleum Institute (API) showed the opposite, though. Crude inventories dropped 5.8 million barrels in the week to March 28, compared with analysts' expectations for an increase of 1.1 million barrels, API data showed.

U.S. crude oil futures pared losses by about 30 cents in post-settlement trade immediately after the report was released.

The U.S. Energy Information Administration will release its official data on Wednesday at 10:30 a.m. EDT (1430 GMT).

Further weighing on Brent, a rebel group in eastern Libya will agree with the government to end its blockade of three, vital oil export ports within days, a senior rebel leader told Reuters on Tuesday. Together, those ports accounted for exports of 600,000 barrels per day (bpd) before they were occupied by rebel groups last summer.

Libya's oil exports have fallen to less than 100,000 bpd from a post-civil war peak of more than 1 million bpd.

Brent crude settled $2.14 lower at $105.62 per barrel, its lowest settlement since Nov. 8. U.S. crude fell $1.84 to $99.74 per barrel.

"Crude is being pressured by the disappointing China data and expectations for further crude oil inventory builds in the United States," said John Kilduff, partner at Again Capital LLC in New York. "There was a technical breakdown as well with U.S. crude pushing below the 200 and 50-day moving averages."

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U.S. crude fell to a session low of $99.47 per barrel, below two key technical levels, the 200-day moving average at $100.49 per barrel and the 50-day moving average at $99.91 per barrel.

Once a price falls below technical levels, it continues to slide lower, Kilduff said.

Brent's premium over U.S. crude <CL-LCO1=R> tightened 30 cents to settle at $5.88, the narrowest settlement since Oct. 4.

Investors have also continued to watch the Ukraine crisis, which has raised fears of possible supply disruptions from Russia, the world's second-largest oil exporter.

In a gesture that could ease tension in the worst East-West stand-off since the Cold War, Russia pulled some troops back from near Ukraine's eastern frontier, a move the United States said would be a positive sign if confirmed as a withdrawal.

Analysts said Tuesday's price falls will likely flatten out later in the week.

"We're not necessarily at the start of a crater," said Phil Thompson, director of Mobius Risk Group in Houston. "(Tuesday's) moves are a little bit exacerbated because liquidity is dropping."

(Additional reporting by David Sheppard in London and Florence Tan in Singapore; editing by David Gregorio, Marguerita Choy and Tom Brown)

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