Oil prices rise on weaker dollar, North Sea outage

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Brent crude oil futures rose on Monday, supported by a weak dollar and a supply outage in North Sea crude oil.

Oil producer Nexen confirmed its North Sea Buzzard oilfield, which supplies Forties, the leading stream behind the Brent benchmark, was shut, supporting prices. The oilfield was expected to return to normal by mid-week.

"I see the Buzzard field issue as leading the way with Brent pushing higher," said New York analyst Dominick Chirichella.

Brent crude futures were $1.82 higher at $102.21 per barrel at 1:50 p.m. EDT (1950 GMT), rebounding from a slip below $100 to $99.66 earlier in the session on weak Chinese data. That was the lowest price for Brent in one month.

The HSBC/Markit Purchasing Managers' Index (PMI) for China, the world's second largest oil consumer, fell to 49.2 in May, showing a contraction in manufacturing for the first time in seven months.

Weak U.S. manufacturing data that showed activity contracted in May for the first time in six months crushed the U.S. dollar and supported higher oil prices.

U.S. crude oil futures were trading $1.50 higher at $93.47 per barrel.

The dollar index against a basket of currencies was trading 1 percent lower.

Oil is priced in dollars and when the dollar sinks, oil becomes less expensive for holders of other currencies. The weak dollar also boosted gold, which jumped 2 percent.

Weak data served a dual supportive role. It pushed the dollar lower and reinforced the idea that the U.S. Federal Reserve would keep its quantitative easing policy.

"People are no longer rooting for good data, they're rooting for bad data. It's this idea that if the data is bad enough that the Fed will still be there. It distorts the whole field of investing," said Walter Zimmermann, chief technical analyst with brokerage United ICAP.

Analysts said slow demand growth with robust supplies would cap gains in oil prices. Record high U.S. supplies and a weak global economic outlook has kept a lid on prices.

Brent crude was rising off of three previous sessions of losses, but was still only able to touch the 10-day moving average on the high end of the session. Brent has fallen for four straight months from a high of $119.17 in February.

U.S. crude maintained itself above the 200-day moving average and was on track for its biggest one-day percentage gain in one month.

But prices are still rangebound and all the market was doing was giving back Friday's losses, Zimmermann said.

"It's not as if it's breaking new ground to the upside."

Oil was also supported by flooding across Europe, which halted barges along the river Rhine, and by supply worries after reports that Iran aimed next year to start a nuclear reactor, which the West fears could arm an atomic bomb.

Markit's Eurozone Manufacturing Purchasing Managers' Index showed on Monday a downturn in manufacturing eased last month but remained widespread as falling prices for factories' goods failed to drum up new business. (Additional reporting by Christopher Johnson in London and Manash Goswami in Singapore; editing by William Hardy, Keiron Henderson, Andrew Hay and David Gregorio)



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