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Brent Crude Settles Lower as Euro Zone Concerns Weigh

Brent crude futures fell on concerns about the euro zone economy, while U.S. crude rose and narrowed the spread between the two contracts, reducing Brent's premium to its U.S. counterpart that had increased considerably last week.

Investors' concerns about the health of the euro zone economy also outweighed confidence stemming from stronger-than-expected demand growth in China revealed last week.

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"(U.S. refined) products are lower because they went up last week on fears the blizzard would harm refineries or infrastructure, but the storm just caused demand destruction," said Phil Flynn, analyst at Price Futures Group in Chicago.

Brent crude futures fell on Monday on concerns about the euro zone economy, while U.S. crude rose and narrowed the spread between the two contracts, reducing Brent's premium to its U.S. counterpart that had increased considerably last week.

Brent crude futures fell 77 cents, or 0.65 percent, to settle at $118.13 a barrel, having traded from $117.54 to $119.07.

U.S. light, sweet crude futures rose $1.31, or 1.37 percent, to settle at $97.03 a barrel, having traded from $94.97 to $97.09.

After the blizzard dropped up to 40 inches (1 meter) of snow with hurricane-force winds on the U.S. Northeast, hundreds of thousands of people were left without power and many stayed off the roads.

The oil markets are expected to see limited trade this week as many Asian markets are shut because of the Lunar New Year. Brent hit a nine-month high on Friday, capping a fourth consecutive week of gains, after data showed Chinese trade surged in January.

"We could see a bit of a pullback today in oil prices in the absence of any significant external factors, including the lack of activity in Asia," said Michael Hewson, analyst at CMC Markets.

While Chinese growth is supporting oil prices, developments in the euro zone threaten to weigh further on equities and the euro. A corruption scandal is threatening political instability in Spain and the outcome of Italy's upcoming election is becoming less certain.

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This week, Germany, France and Italy will release their latest quarterly figures on gross domestic product, which are expected to point to a contraction in the three major European economies.

Analysts said oil prices could weigh on a euro zone recovery after the recent rally in Brent, which was supported by positive economic sentiment.

Supply worries in the Middle East eased slightly with the revelation that Washington and Tehran may have more time to negotiate over Iran's disputed nuclear program after news that Iran appears to have resumed converting small amounts of its higher-grade enriched uranium into reactor fuel.