Oil futures dipped on Monday as increasing signs of global economic slowdown prompted risk aversion, with the increase in speculators' short positions in U.S. crude further deepening its discount to North Sea Brent.
By 0916 GMT (5:16 a.m. ET), U.S. crude futures slipped by 75 cents to $98.54 a barrel. Brent crude dipped by 34 cents to $118.44.
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"Signs of slowdown are everywhere," Oliver Jakob with Petromatrix said.
World stocks fell to a 12-week low mainly because Chinese data highlighted concerns about weaker global growth momentum, prompting investors to unwind positions in higher-risk assets and buy government bonds.
The MSCI world equity index .MIWD00000PUS fell to its weakest since mid-March. The index has lost nearly 8 percent since hitting a three-year peak in late April and is very close to erasing all of its 2011 gains.
Further pressure came from Saudi Arabia's divergence with the rest of OPEC last week. The world's top oil exporter will raise output to 10 million barrels per day (bpd) in July, Saudi newspaper al-Hayat reported on Friday, as Riyadh goes it alone in pumping more outside official OPEC policy, aiming to place additional supplies among Asian buyers.
The discount of U.S. crude to Brent crude widened to a record $20.03 a barrel.
"The main driver is Friday's CFTC report showing money managers increased short positions in U.S. crude in the week before the OPEC meeting. It is pressuring the discount on U.S. crude," Jakob added.
On Friday, the U.S. Commodity Futures Trading Commission said the "money manager" speculator group, including large hedge funds, cut its net long position on U.S. crude futures by a sharp 15 percent in the week to June 7 on the New York Mercantile Exchange.
Underproduction of the key North Sea Forties crude and a lack of Libyan crude exports are exacerbating the premium on ICE Brent futures.
Rising flows of Canadian crude into the Cushing, Oklahoma, delivery point of the U.S. crude contract and lack of infrastructure to move that crude to the large concentration of refineries along the U.S. Gulf Coast have kept U.S. crude in deep discounts to Brent this year.
(Additional reporting by Alejandro Barbajosa; editing by Keiron Henderson)