GO
Loading...

UPDATE 7-Brent down slightly, pares losses on weather demand

* Global equities markets fall as emerging markets, China data weigh

* U.S. manufacturing growth slows in January

* Libya prime minister orders troops to occupy ports

(Rewrites top, adds analyst quote, updates prices)

NEW YORK, Feb 3 (Reuters) - Brent crude oil traded lower on Monday, but pared losses sharply following a rise in heating oil prices as cold weather in the U.S. Northeast drove up demand.

Oil futures remained broadly pressured by worries over emerging markets, weak factory data from China and expectations for lower demand as U.S. refiners shift into maintenance season.

A fresh round of snowfall fell on the U.S. Northeast on Monday after several inches were dumped on the Ohio Valley a day earlier, driving demand for U.S. distillates, which include heating oil, higher.

"The heating oil found its way and led the way back up," said Jeff Grossman, president of BRG Brokerage in New York. "The Northeast is all heating oil and there is plenty being consumed right now."

Weakening equities and currencies in emerging market economies pressured global markets lower and weighed on oil prices. U.S. stock indexes pulled oil lower after data showed the factory sector in the world's largest economy expanded in January at its slowest pace in eight months.

Brent was trading down 9 cents at $106.31 a barrel by 12:59 p.m. EST (1759 GMT), having sunk to a near 3-month low of $105.40 earlier in the session. U.S. oil fell 79 cents to $96.70 a barrel.

U.S. ultra-low sulfur diesel (ULSD), known more commonly as heating oil, was up 1.09 cents to $3.0080 a gallon. It had previously risen about 2 cents to a session high of $3.0185.

Brent's premium to U.S. crude oil contracted earlier in the session to $8.06, just above the low of $8.04 set on Oct. 18, as some analysts and traders expect data to show a large draw in supplies at Cushing, Oklahoma - the delivery point for the U.S. oil futures contract.

But weakening U.S. oil prices widened the spread between the two benchmarks to more than $9 <CL-LCO1=R> in early afternoon trading.

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.

CHINA WEIGHS, MIDDLE EAST SUPPORTS

Analysts said macroeconomic demand issues in China, the world's second largest oil consumer, would continue to weigh on energy markets globally.

Data released over the weekend showed China's factory growth eased to a six-month low in January, according to the official Purchasing Managers' Index by the National Bureau of Statistics.

The potential impact of international political tensions on oil supplies 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.

In Iraq, the army intensified its shelling of Falluja in preparation for a ground assault to regain control of the city, which has been under the control of militants for a month.

Syria, though not vital in terms of oil shipments, has continued to worry markets amid concerns that the crisis there could spill across the Middle East to engulf major exporters.

(Additional reporting by Peg Mackey in London and Manash Goswami in Singapore; editing by Anthony Barker, Dale Hudson, Chris Reese and G Crosse)