UPDATE 8-Brent crude loses over $1 as Libya port deal nears
* Libyan port deal could be done in 2-3 days -govt official
* U.S. crude oil stocks fall 2.4 mln barrels -EIA
* Brent May contract briefly falls to parity with June contract
* Brent-WTI spread touches tightest point in 6 months (Updates prices)
By Elizabeth Dilts
NEW YORK, April 2 (Reuters) - Brent oil fell by nearly $1 to its lowest price in almost five months on Wednesday, pulling U.S. crude lower with it, on expectations that rebel-held Libyan ports will reopen within days.
Crude prices on both sides of the Atlantic had tumbled nearly 2 percent on Tuesday after weak Chinese and European manufacturing data dampened the outlook for global demand and news emerged of fresh talks to reopen Libyan ports after months of closures.
The downward pressure on Brent prices continued as Libyan government officials said they could finalize a deal with rebel groups to reopen the ports, which previously accounted for 600,000 barrels of oil exports per day, within two to three days.
U.S. crude oil prices tried to rally on bullish data from the Energy Information Administration (EIA) on Wednesday that showed domestic crude inventories fell last week. But the American benchmark held in negative territory on a number of other economic factors.
A key global stock index edged up to a 6-year high and eight of 10 S&P 500 sectors were in positive territory, as investors appeared to be pulling out of commodities like oil to take advantage of the equities rally, analysts said.
Also, the U.S. dollar was stronger against a basket of foreign currencies, which weighed on commodities like oil that are priced in dollars.
"In addition to Libya, the Euro zone economy is so bad they may have to potentially adopt zero-percent interest rates to get things going again, and these are not bullish factors for Brent," said Walter Zimmermann, chief technical analyst at United-ICAP.
The Euro zone economy does not look as healthy as the U.S. economy, which is why U.S. crude is not falling as much, Zimmermann said.
U.S. crude oil fell to $98.85 a barrel in the wake of the U.S. data, but pared losses to settle just 12 cents lower at $99.62 per barrel.
Brent crude oil settled 83 cents lower at $104.79 a barrel after falling to $103.95, its lowest since Nov. 8.
The Brent May contract briefly fell to parity with the Brent June contract, threatening to move to a discount, or contango, which signals ample supplies and weak demand.
Contango has been rare in the Brent market over the past three years as supply outages have tended to keep the contract closest to delivery above those for delivery in the future.
The spread between Brent and U.S. oil, or WTI, contracted to $4.81, its narrowest intra-session point since Sept. 24, led by declines in Brent. It settled at $5.17.
"As U.S. crude oil is easier to get to the Gulf Coast, that spread will come in and people will be interested in that as a speculative position if it (falls below) $5," said Phil Thompson, director of Mobius Risk Group in Houston.
Zimmermann predicts the spread could tighten to as little as $1-$2.
Surveys showing that factories across Europe eased back on the throttle in March and that China's vast manufacturing industry contracted for a third straight month have raised expectations that oil demand could falter. [ID:nL1N0MT11I}
Crude inventories fell 2.4 million barrels in the week to March 28, compared with analyst expectations for an increase of 1.1 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub fell for the ninth straight week by 1.2 million barrels.
U.S. Gulf Coast crude oil imports fell to their lowest since September 2008, due to the closure of the Houston Ship Channel for most of the reporting period following a fuel oil spill after a collision of two vessels. (Additional reporting by Lin Noueihed and David Sheppard in London, and Florence Tan in Singapore; Editing by William Hardy and Nick Zieminski)
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