Brent up on supply worry, U.S. crude dips with equities

A customer fills his Aston Martin DB9 car at a petrol station, in south London, March 2, 2011.

NEW YORK (Reuters) - Brent crude rose on Tuesday, after three straight declines, as tight North Sea supplies, continuing uncertainty about Libya's oil and more tropical weather threats boosted prices.

U.S. oil ended lower, but well above its low, as the National Hurricane Center monitored two low-pressure systems, one in Gulf of Mexico and another in the Atlantic, that could turn into tropical cyclones.

Producers restaffed platforms on Tuesday and more than half of the Gulf of Mexico crude production remained off line following Tropical Storm Lee.

The weather helped U.S. crude turn higher and then seesaw in post-settlement trading. It was pressured early by weak equities as U.S. markets resumed trading after the U.S. Labor Day holiday on Monday and were pressured by fears about a global economic slowdown and euro zone debt problems.

Brent's premium to U.S. crude reached a record peak above $27 a barrel intraday, eclipsing Friday's record $26.98.

"Libya's crude is still not in play and North Sea problems remain supportive for Brent, and U.S. markets are still playing catch-up after being shut," said Phil Flynn, analyst at PFGBest Research in Chicago.

ICE Brent crude for October rose $2.81 to settle at $112.89 a barrel, rebounding after dropping $2.25 on Monday.

U.S. October crude fell 43 cents to settle at $86.02 a barrel, after trading from $83.20 to $86.50.

Trading volumes for Brent and U.S. crude were below a half million lots traded and well under their 30-day averages.

The Brent crude spread to U.S. crude stood at $26.87 based on settlements, after reaching $27.23 intraday.

"Money managers are getting a bigger bang for their buck buying bullet-proof Brent," said Tim Evans, energy analyst for Citi Futures Perspective in New York.

Evans and other brokers and analysts noted the Brent's price resilience even as the end of Libya's conflict seems near and evidence of economic slowing in Europe, China and the United States increases.

ECONOMIC CONCERNS GO GLOBAL

European equities closed at their lowest in more than two years on worries about the euro zone debt crisis.

Wall Street fell a third straight day on fears Europe is failing to tackle its debt crisis, though stock indexes ended above their intraday lows.

Equities and oil received some support from data showing U.S. services sector growth picked up in August, but analysts noted that the report revealed the pace of hiring slowed slightly and comes after Friday's dismal U.S. nonfarm payrolls report for August.

A senior Chinese official said Tuesday that China's growth may fall below 9 percent in 2012.

Also ominous for oil prices, a report by the United Nations economic think tank UNCTAD projected global economic growth would slow to 1.5 percent in 2012, less than half the U.N. forecasted growth for 2011.

SUPPLY ISSUES SUPPORTIVE

Along with the production shut in the Gulf of Mexico by tropical weather, other supply issues supported oil prices.

Another cargo of North Sea Forties crude, the Brent benchmark, has been delayed in September, pushing the total to fifteen.

China ordered a major oilfield owned by CNOOC (0883.HK) and ConocoPhillips (COP.N) closed because of leaks. Analysts expect the closure to reduce state CNOOC's total output by about 2 percent in 2011 and increase China's imports.

Libya's 1.6 million barrels per day of crude output remains offline, though there continues to be signs the country's conflict could be nearing a resolution.

U.S. crude inventories likely fell last week because of imports and production curbed by Hurricane Irene and Tropical Storm Lee, a Reuters analysts survey showed on Monday.

(Additional reporting by Gene Ramos in New York, Christopher Johnson in London and Francis Kann in Singapore; Editing by Dale Hudson, Marguerita Choy and Bob Burgdorfer)