Brent crude dipped below $106 per barrel on Monday, weighed by data showing China's oil demand growth slowed further in 2013 and by news Iran had started implementing a nuclear deal with world powers, which could eventually allow more oil exports.
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Implied oil demand in China, the world's second-biggest oil consumer, rose just 1.6 percent last year, or 150,000 bpd on the year, according to Reuters calculations based on preliminary government data and unrevised 2012 figures.
That compared with a forecast by the International Energy Agency of 3.8 percent growth in China's 2013 implied oil demand - a measure based on a combination of crude oil throughput and net imports of refined products that does not adjust for stocks changes.
"The Chinese data has contributed to negative market sentiment," said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt. "China oil demand growth is slowing."
Brent crude oil for March dropped as low as $105.81 a barrel, before paring losses to last trade at $106.31 a barrel by 3:17 p.m. EST (2017 GMT), down 17 cents on the day.
U.S. crude for February delivery was trading 65 cents lower at $93.72 per barrel, after settling up 41 cents at a two-week high on Friday.
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U.S. crude volumes were low on Monday. Floor trading was shut, and there will be no settlement on the New York Mercantile Exchange due to the Martin Luther King Jr. Day U.S. holiday.
Oil market sentiment was influenced by news that Iran was beginning to implement the terms of a nuclear agreement with world powers, halting its most sensitive nuclear activity. . The White House announced that the United States, Britain, France, Germany, Russia, China and the European Union would follow through on their commitment under the pact to begin lifting sanctions on Iran.
The sanctions have cut Iran's oil exports by more than half over the past 18 months to about 1 million bpd.
Tehran has said it will take six months after sanctions are lifted to return to full crude oil output capacity of 4 million bpd, a level last seen in 2011.
"The prospect of a growing oil supply is continuing to weigh on prices," Fritsch said.
Expectations of more supply from Libya could also keep Brent prices under pressure this week. The Libyan government said it plans to remove protesters, who have seized eastern ports used for oil exports, within the next few days.
The three ports, which together accounted for 600,000 barrels per day of exports, have been occupied by heavily armed rebels since the summer.
(By Nia Williams and Christopher Johnson; Additional reporting by Jacob Gronholt-Pedersen in Singapore, Editing by Jonathan Oatis)