Crude oil futures tumbled on both sides of the Atlantic on Monday on early signals that oil output in Libya may be starting to recover and concerns over a buildup in local government debt in China, the world's second-largest oil consumer.
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Brent is less than $1 from where it began in January after trading in a range of $22, while U.S. crude has gained 8% year-to-date in spite of ever-climbing domestic shale oil production.
Libya's Sarir and Messla oilfields are up and running, a National Oil Corp spokesman said, although the Hariga port they connect with needs to reopen before exports can resume.
The North African OPEC producer has been pumping a mere 250,000 barrels per day (bpd) versus 1.4 million bpd in July before civil unrest disrupted flows.
China's state auditor said in a report local governments had total outstanding debt of 17.9 trillion yuan, or nearly $3 trillion, at the end of June, a sum that includes contingent liabilities and debt guarantees.
"The China debt revelation was very unsettling, and raises a big concern for the oil market's swing demand center. The resumption of some Libyan oil is also pressuring prices today," said John Kilduff, partner at Again Capital LLC in New York.
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U.S. crude futures dropped on profit-taking after reaching a two-month high above $100 on Friday following a report showing stockpiles of crude oil had fallen for a fourth straight week, analysts said.
"The market made a last gasp to push above $100, and coming into this week we didn't seem to be attracting any fresh speculative buyers into the market," said Gene McGillian, an energy analyst with Tradition Energy in Stamford, Connecticut.
Brent crude shed 97 cents to settle at $111.21 a barrel after earlier hitting a low of $110.90. U.S. crude fell $1.03 to settle at $99.29.
Heating oil led the complex lower, falling by around 1.5 percent as concerns eased on distillate supplies following the reopening of French refineries closed by strikes.
The price of U.S. crude has increased 7 percent in December as inventories declined, although some of the drawdown may have been due to a tax incentive.
"Going into 2014, people are going to see whether this drawdown in crude stockpiles was for accounting purposes, and will we start to build our inventories again," said McGillian.
The spread between the two benchmarks <CL-LCO1=R> held steady on Monday near $12, above the 2013 average of $10.57.
That spread is expected to narrow as the Keystone XL pipeline is launched in the United States.
The pipeline will allow rising inventories at the Cushing, Oklahoma, oil hub to move to the U.S. Gulf Coast, where a large share of the country's refining capacity is concentrated.
Rising violence in South Sudan, where crude output has fallen nearly a fifth to 200,000 bpd, checked further losses.
Money managers raised their net long U.S. crude futures and options positions in the week to Dec. 24, the U.S. Commodity Futures Trading Commission (CFTC) said on Monday.
The speculator group raise its combined futures and options position in New York and London by 11,824 contracts to 325,245, equivalent to around 3.5 days' worth of global oil demand.
(By Anna Louie Sussman; Additional reporting by Robert Gibbons in New York, Peg Mackey in London, Jacob Gronholt-Pedersen in Singapore; Editing by Dale Hudson, Anthony Barker, Andrew Hay, Meredith Mazzilli and Steve Orlofsky)