Brent falls below $108 after rally, U.S. data in focus

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Brent crude oil dropped below $108 per barrel on Monday after a sharp rally in the previous session as investors awaited U.S. data this week for hints on when the Federal Reserve will scale back its stimulus.

Losses were checked, however, by supply outages in major producers Libya and Iraq.

Brent slipped 39 cents to $107.83 a barrel by 1338 GMT after sinking as low as $107.43 earlier. U.S. crude was off 54 cents at $105.43.

On Friday both crude oil benchmarks had logged their biggest daily percentage gains in a week following unexpected strength in trade data from China.

"We remain sceptical as to whether the upswing can continue," said a Commerzbank research note. "The oil market also remains amply supplied in the medium term."

In the near term, market players were taking stock of protests in Libya that have cut exports to less than half of normal rates of 1 million barrels per day (bpd) for two weeks running and by port work next month in Iraq that is expected to cut shipments there by 500,000 bpd.

"We remain constructive on prices this summer as seasonally stronger crude demand and supply disruptions point to tighter balances (in the third quarter)," Morgan Stanley analysts said in a note.

"We expect spot prices to remain elevated, and moves above $110 remain possible."

The Chinese data, a sign that the economy might be stabilising in the world's No.2 oil consumer after more than two years of slowing growth, helped keep losses in check on Monday.

China's oil imports rose to a record in July, although implied oil demand softened from a four-month high in June.

Worries that tensions in Egypt and Syria could spill over into Gulf oil-producing countries and disrupt supplies were expected to support crude prices as well.

Market players were awaiting a slew of U.S. data this week for hints on when the Federal Reserve will start winding back its monetary stimulus.

The United States reports retail sales, consumer prices, housing starts, industrial production and surveys of regional manufacturing this week.

Any reduction in economic stimulus by the Fed will cut the flow of cheap central bank money that has boosted market liquidity.



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