CORRECTED-UPDATE 1-Brent edges down towards $108 on disappointing China PMI

Mon May 5, 2014 3:08am EDT

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(Corrects Friday's price movements for Brent, U.S. crude in paragraph 4)

* China manufacturing sector contracts for fourth straight month

* Ukraine tension escalates; may affect oil, gas supplies

By Jacob Gronholt-Pedersen

SINGAPORE, May 5 (Reuters) - Brent crude slipped towards $108 a barrel on Monday after fresh data showed China's manufacturing sector contracted for a fourth consecutive month in April, although increasing tension in Ukraine prevented further losses.

China's economy continued to lose momentum in April with HSBC's final PMI reading easing to 48.1, lower than a preliminary reading but up slightly from an eight-month low in March.

"Oil is paring back on the back of these numbers and the trend may continue throughout the afternoon session in Asia," said Ben Le Brun, a market analyst with OptionsXpress in Sydney.

Brent crude for June delivery was 13 cents lower at $108.46 per barrel by 0514 GMT, after settling 83 cents higher. U.S. oil was 12 cents higher at $99.88, following a rise of 34 cents on Friday.

The disappointing Chinese data came after the U.S. economy added 288,000 jobs in April, more than expected and the largest increase since January 2012, which helped lift oil prices on Friday.

With Washington in the process of curtailing its massive monetary stimulus, which has helped support oil prices, the loss of steam in China's growth engine in the past year has left investors second guessing about possible stimulus measures from Beijing.

UKRAINE TENSION

Brent was supported by increasing tension in Ukraine over the weekend as violence moved to the western part of the country, with dozens of pro-Russian activists killed in a blaze at a building in Odessa they had occupied after clashes with pro-Kiev groups.

Pro-Russian militants then stormed a police station in Odessa on Sunday and freed nearly 70 fellow activists.

Russia has said it would reduce natural gas supplies to Ukraine in June if no prepayment is received this month, raising concerns that energy supplies to the European Union could be affected.

A third of the EU's gas demand is met by Russia, with almost half of that passing through Ukraine. Russia also ships crude oil through Ukraine to countries in Eastern Europe via the Druzhba pipeline.

"It is a concern and it could be a positive for Brent given the supply chain in Europe," said Le Brun.

Supply from Libya remained limited even after tribesmen ended their blockade of the El Sharara oilfield as production cannot resume until a separate protest at a connecting pipeline is resolved, an oil official said on Sunday.

Iraq's monthly oil exports reached 2.512 million barrels per day (bpd) in April, rising from 2.139 million bpd in March. Exports from the south of the country, where the bulk of Iraq's crude is produced and shipped abroad, reached its highest since 2003. (Reporting By Jacob Gronholt-Pedersen; Editing by Subhranshu Sahu and Richard Pullin)

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