×

UPDATE 7-Brent crude dips on growth worry, supply fears support

* Weak demand outlook to pressure oil, supply risks remain

* Investors cautious ahead of this week's U.S. jobs data

* Iraqi crude output, exports seen higher in 2013

* Coming up: API oil data 4:30 p.m. EDT Tuesday

(Recasts, updates prices, market activity)

By Robert Gibbons

NEW YORK, Oct 2 (Reuters) - Brent crude prices eased in choppy, light trading o n T uesday as a weak outlook for economic growth and petroleum demand kept crude futures hemmed in, even as the risk of potential supply disruptions limited losses.

Global economic activity has slowed this year, curbing fuel demand growth in Asia, Europe and the United States. Investors remain wary, however, of unplanned supply disruptions, especially from the Middle East, that could force prices higher.

U.S. crude futures also saw light, seesaw trading, managing to push slightly higher in midday dealings in New York.

The euro supported oil prices, rising for a second straight session on growing expectations the euro zone's fourth-largest economy, Spain, will seek a bailout. The dollar index weakened.

Bets that Spain will soon ask the euro zone for support initially boosted equities on Wall Street, before the S&P 500

and other major indexes turned lower.

Investors remained cautious ahead of this week's U.S. employment gauges. Reports due include payroll processor ADP's measure of private sector hiring, followed by government data on U.S. initial jobless claims and, on Friday, the closely watched September nonfarm payrolls.

Brent November crude fell 23 cents to $111.96 a barrel by 12:23 p.m. EDT (1623 GMT).

A choppy price trajectory from $111.70 to $112.45 took Brent to both sides of the 50-day moving average of $112.07 and the 200-day moving average of $112.09, technical levels that are closely watched by traders.

U.S. November crude was up 15 cents to $92.63 a barrel, after reaching $92.94.

Trading volume was light, and while Brent outpaced U.S. crude turnover both markets were well below their respective 30-day averages.

Oil prices drew support on Monday from data showing U.S. manufacturing unexpectedly grew last month for the first time since May. Offsetting the U.S. data were reports showing that euro zone factories suffered their worst quarter since early 2009 and that China lost steam .

"Economic data is bearish for oil and the immediate risk for prices is to the downside," said Tamas Varga, an oil analyst at brokers PVM Oil Associates in London.

"But geopolitics is supporting the market. It may be very unlikely, but investors are still worried there could be a war in the Middle East. And, as long as stories about Iranian nuclear operations keep coming, those worries are not going to go away."

Delayed October loadings for North Sea Forties crude oil cargoes because of lower-than-expected output have also limited the downside for crude futures prices.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Brent 24-hour technical outlook: WTI 24-hour technical outlook: ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> GEOPOLITICAL WILD CARDS

The dispute between the West and Iran over Tehran's nuclear program continues to simmer after last week's rhetorical flourishes by heads of state at the United Nations.

Analysts and traders also have also focused on OPEC-member Venezuela ahead of Sunday's election as President Hugo Chavez seeks a new six-year term.

Iran has coped with Western economic sanctions, and Iran's central bank has supplied enough hard currency to finance imports even with sanctions cutting oil earnings, President Mahmoud Ahmadinejad said on Tuesday.

Ahmadinejad was speaking after the Iranian rial plunged to a record low against the U.S. dollar earlier in the day.

While Iran's exports remain curbed by a European Union (EU) embargo entering its fourth month, output in neighboring Iraq is likely to hit 3.4 million barrels per day (bpd) while exports are expected to average 2.9 million bpd in 2013, the top energy advisor to the Iraqi prime minister said on Tuesday.

U.S. OIL INVENTORIES

Investors will get the first weekly snapshot of U.S. oil inventories on Tuesday when industry group the American Petroleum Institute releases its report at 4:30 p.m. EDT (2030 GMT).

U.S. crude stocks were expected to have risen last week, a Reuters poll of analysts showed on Monday. Gasoline and distillate stockpiles were expected to be slightly lower.

(Additional reporting by Christopher Johnson and Alice Baghdjian in London and Luke Pachymuthu and Manolo Serapio Jr in Singapore; editing by Andrew Hay and Jim Marshall)

((robert.gibbons@thomsonreuters.com)(+1 646 223 6059)(Reuters Messaging: robert.gibbons.reuters.com@reuters.net))

Keywords: MARKETS OIL/