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 U.S. crude notched its largest daily percentage loss in nearly a
month, weighed down by U.S. stock indexes that fell after data
showed the factory sector in the world's largest economy expanded in
January at its slowest pace in eight months. The S&P 500 sunk to its
lowest level since October.
"The manufacturing data put the U.S. market in the barrel today,"
said John Kilduff, partner at Again Capital LLC, a hedge fund.
"Brent was reacting more to the emerging markets last week, and now
WTI is playing catch up."
Brent's losses were capped after traders started to buy contracts to
rebalance the spread between the European benchmark and its U.S.
counterpart, West Texas Intermediate, which had tightened during the
session to its narrowest in three months, brokers said.
U.S. oil fell $1.09 to settle at $96.43 a barrel, falling below the
10-day moving of $96.85 for the first time since Jan. 15. Brent fell
36 cents to settle at $106.04 a barrel, after sinking during the
session to a near three-month low of $105.40.
Losses in Brent were also capped on news of output glitches at the
North Sea Buzzard oilfield, the largest of the fields that
contribute to the Forties crude blend and which underpins Brent.
A fresh round of snowfall blanketed the U.S. Northeast, which
boosted heating oil futures, and Brent retraced losses. U.S.
ultra-low sulfur diesel (ULSD), known more commonly as heating oil,
settled a penny higher at $3.0075 a gallon. It had previously risen
about 2 cents to a session high of $3.0185, supporting oil prices.
WTI's further declines widened its discount to Brent oil to $9.61.
Early in the session, it tightened to $8.06, just above the low of
$8.04 set on Oct. 18.
Market players also turned their attention to refiners moving into
maintenance that would curb demand for crude oil.
"I think the market is being turned on its head because we are going
into peak refinery turnaround season," said Stephen Schork, editor
of the Schork Report in Villanova, Pennsylvania. "Demand is drying
up for crude."
U.S. oil refiners are expected to take 800,000 barrels per day (bpd)
of capacity offline in the week ending Feb. 7, down from 979,000 bpd
the previous week, data from research company IIR showed on Monday.
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CHINA WEIGHS, MIDDLE EAST SUPPORT
Data released over the weekend showed factory growth in China, the
world's second-largest oil consumer, eased to a six-month low in
January, according to the official Purchasing Managers' Index by the
National Bureau of Statistics, which weighed on oil markets.
Civil unrest in Middle Eastern nations is expected to keep a floor
under prices.
The Libyan prime minister said on Monday he ordered troops to move
toward oil exporting ports in the east that have been under rebel
control for months, but traders were uncertain that it would result
in a supply rebound.
Syria has continued to worry markets amid concerns that the crisis
there could spill across the Middle East to engulf major exporters.
Oil traders also monitored continuing violence in Iraq.
Investors awaited oil inventory data to be released on Tuesday and
Wednesday by the American Petroleum Institute and the U.S. Energy
Information Administration.
U.S. commercial crude oil and gasoline stocks were forecast to have
risen last week, while distillates were seen lower, a preliminary
Reuters poll of analysts showed on Monday.
(Additional reporting by Peg Mackey in
London and Manash Goswami in Singapore; editing by Anthony Barker,
Dale Hudson, Chris Reese and G Crosse)
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