U.S. oil futures fell more than $1 on Monday, pressured by weak U.S. factory data and a sinking stock market, while Brent crude's decline was limited by rising heating oil prices as a snowstorm swept across the U.S. Northeast.
U.S. crude notched its largest daily percentage loss in nearly a month, weighed down by U.S. stock indexes that fell after data showed the factory sector in the world's largest economy expanded in January at its slowest pace in eight months. The S&P 500 sunk to its lowest level since October.
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"The manufacturing data put the U.S. market in the barrel today," said John Kilduff, partner at Again Capital LLC, a hedge fund. "Brent was reacting more to the emerging markets last week, and now WTI is playing catch up."
Brent's losses were capped after traders started to buy contracts to rebalance the spread between the European benchmark and its U.S. counterpart, West Texas Intermediate, which had tightened during the session to its narrowest in three months, brokers said.
U.S. oil fell $1.09 to settle at $96.43 a barrel, falling below the 10-day moving of $96.85 for the first time since Jan. 15. Brent fell 36 cents to settle at $106.04 a barrel, after sinking during the session to a near three-month low of $105.40.
Losses in Brent were also capped on news of output glitches at the North Sea Buzzard oilfield, the largest of the fields that contribute to the Forties crude blend and which underpins Brent.
A fresh round of snowfall blanketed the U.S. Northeast, which boosted heating oil futures, and Brent retraced losses. U.S. ultra-low sulfur diesel (ULSD), known more commonly as heating oil, settled a penny higher at $3.0075 a gallon. It had previously risen about 2 cents to a session high of $3.0185, supporting oil prices.
WTI's further declines widened its discount to Brent oil to $9.61. Early in the session, it tightened to $8.06, just above the low of $8.04 set on Oct. 18.
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 SUPPORT
Data released over the weekend showed factory growth in China, the world's second largest oil consumer, eased to a six-month low in January, according to the official Purchasing Managers' Index by the National Bureau of Statistics, which weighed on oil markets.
Civil unrest in Middle Eastern nations 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, but traders were uncertain that it would result in a supply rebound.
Syria has continued to worry markets amid concerns that the crisis there could spill across the Middle East to engulf major exporters. Oil traders also monitored continuing violence in Iraq.
Investors awaited oil inventory data to be released on Tuesday and Wednesday by the American Petroleum Institute and the U.S. Energy Information Administration.
U.S. commercial crude oil and gasoline stocks were forecast to have risen last week, while distillates were seen lower, a preliminary Reuters poll of analysts showed on Monday.
(By Elizabeth Dilts; Additional reporting by Peg Mackey in London and Manash Goswami in Singapore; editing by Anthony Barker, Dale Hudson, Chris Reese and G Crosse)