CORRECTED-UPDATE 7-Brent crude falls on weak China data in volatile trading

Mon Mar 24, 2014 8:11pm EDT

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(Corrects paragraph 7 to show Brent oil settled at $106.81 a barrel)

* China PMI contracts in March

* Hopes for stimulus to aid China economy caps losses

* Ukraine crisis, Libya keep market focus on supply risks

By Anna Louie Sussman

NEW YORK, March 24 (Reuters) - Brent crude oil fell and U.S. crude edged slightly higher in chopping trading on Monday as lackluster manufacturing data from the world's largest oil consumer was balanced by supply concerns over the Ukraine crisis and turmoil in Libya.

China's manufacturing activity shrank in March, a preliminary private survey showed, pointing to slowing demand in the world's biggest energy consumer and adding to a string of weak indicators this year that have reinforced concerns about a slowdown.

Supply concerns supported Brent oil for most of the day, on the risk that a confrontation with the West over Ukraine could lead to a disruption of energy supplies from Russia, a major supplier of oil and gas to Europe.

Libyan oil exports are also running at more than 1 million barrels per day (bpd) below capacity thanks to civil unrest.

The US benchmark West Texas Intermediate (WTI) gained support from reports Monday that major Texas shipping channels for the delivery of crude oil to more than one-tenth of the nation's refining capacity were shut for a third day, as the cleanup from a spill threatened to last through the week.

"It's a two-sided trade right now, of demand expectations versus supply disruptions," said Phil Flynn, an analyst with the Price Futures Group in Chicago, Illinois.

Brent crude for May fell 11 cents to settle at $106.81 a barrel. The oil benchmark fell for a fourth straight week last week. U.S. crude oil rose 14 cents to settle at $99.60 a barrel.

Prices for both benchmarks zig-zagged throughout the day. Brent swung by more than $1, from a low of $106.45 to a high of $107.50. U.S. crude covered even more ground, from $99.05 to $100.29.

"There are flows in both directions, and they don't always match evenly, so we get some incidental price fluctuations," said Tim Evans, energy analyst at Citi Futures Perspective.

The spread between the two benchmarks narrowed slightly, to $7.21 from Friday's close of $7.46.

Brent crude has lost 3.6 percent this year, giving up gains after rising to $112 in early March, its highest in more than two months, amid geopolitical risks as Russia took control of Ukraine's Crimea region.

It slid further in post-settlement trading, falling by 33 cents to $106.60 by 3:11 pm EDT (1911 GMT). U.S. crude also dipped, falling 4 cents in post-settlement trading.

Concerns that tensions in the Crimea region could still worsen helped stem declines. NATO's top military commander said on Sunday Russia had built up a "very sizeable" force on its border with Ukraine and Moscow may have a region in another ex-Soviet republic, Moldova, in its sights after annexing Crimea.

Russian troops, using armoured vehicles, automatic weapons and stun grenades, seized some of the last military facilities under Ukrainian control in Crimea on Saturday. Russian President Vladimir Putin formally annexed the Black Sea peninsula the day before.

In Libya, rebels have occupied ports and oilfields, depressing the country's oil production to below 250,000 bpd, the state-run National Oil Corp (NOC) said. The NOC said on Monday it shut the El Feel oilfield, because the pipeline to the Mellitah port was closed.

National oil production will fall to around 150,000 bpd on Tuesday as result, leaving almost nothing for export. An NOC spokesman said he did not know the reason for the pipeline closure.

An oil tanker seized by U.S. forces after it loaded crude at a Libya port held by anti-government rebels has docked back in the capital Tripoli, a Reuters witness said on Sunday.

(Additional reporting by Christopher Johnson in London, Keith Wallis in Singapore; editing by Susan Fenton, Keiron Henderson and Tom Brown)

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