UPDATE 8-Brent down over $1 on China worries; gasoline prices drop

Mon May 5, 2014 3:10pm EDT

Related Topics

* U.S. gasoline falls to one-month low

* China factory activity down for fourth month

* Ukraine tension escalates

* Protest ends at Libya's EL Sharara (Adds settlement prices)

By Elizabeth Dilts

NEW YORK, May 5 (Reuters) - Brent crude oil fell by more than $1 a barrel on Monday, pressured by reports that China's manufacturing sector contracted and Libya's oil output was recovering.

U.S. gasoline prices fell to their lowest point in more than a month as traders sold off long positions ahead of the switch in gasoline grades for the summer driving season. The seasonal trend pulled the entire global oil complex lower, analysts said.

"The bottom is falling out of RBOB," said Walter Zimmermann, chief technical analyst at United-ICAP in New Jersey. "You have serious long liquidation. There is no way Brent or WTI can have an up day when the gasoline market is in a nosedive."

Brent crude for June delivery settled 87 cents lower at $107.72 a barrel. The European benchmark fell as much as $1.54 earlier in the session. U.S. crude settled 28 cents lower at $99.28 a barrel.

U.S. gasoline settled 3.5 cents lower at $2.9092 a gallon, its lowest settlement since April 2. The contract rose to a high of $3.1128 on April 24, and has fallen steadily since.

Ample supply is also weighing on the contract. Last week's report from the U.S. Energy Information Administration showed an unexpected increase in gasoline stockpiles.

Capping losses in U.S. crude oil was news that growth in the U.S. services sector accelerated in April, rising at the fastest pace in eight months, providing further evidence that economic activity is regaining momentum after lagging through much of the harsh winter.

The result of the HSBC/Markit purchasing managers' index for China added to worries that the Chinese economy is still losing momentum.

In Libya, tribesmen ended a blockade of the El Sharara oilfield and engineers said they hoped to resume pumping within a week.

The global oil market appeared to shrug off the ongoing violence in Ukraine.

Pro-Russian rebels shot down a Ukrainian helicopter in fierce fighting near the eastern town of Slaviansk, and Kiev drafted police special forces to the southwestern port city of Odessa to halt a feared westward spread of rebellion.

In response, Russia's foreign ministry called on Kiev to "stop the bloodshed, withdraw forces and finally sit down at the negotiating table."

Russia, which supplies a third of the European Union's natural gas demand, much of which passes through Ukraine, has threatened to reduce supplies to Kiev in June if no prepayment is received. (Reporting by Alex Lawler and Jacob Pedersen; Editing by Jason Neely, Keiron Henderson, Peter Galloway, Marguerita Choy and Paul Simao)

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