* China Oct official manufacturing PMI beats forecasts
* Global surplus oil capacity inches up in September,
* Libya oil exports restricted, efforts to end crisis falter
* Brent oil targets $107.62 - technicals
By Manash Goswami
SINGAPORE, Nov 1 Brent futures rose above $109 a
barrel on Friday on expectations of steady demand growth as the
manufacturing sector in China, the world's second-biggest oil
consumer, expanded at its fastest pace in 18 months.
The European benchmark came under pressure overnight as
investors sold the spread between the contract and the U.S.
benchmark after the price difference between the two widened to
the most in six months.
Yet Brent is set to post its biggest weekly gain in about
two months, on concerns over supply as Libya struggles to ramp
up exports and unrest in Iraq worsens.
Brent crude gained 22 cents to $109.06 a barrel by
0404 GMT, after settling down $1.02. U.S. oil slipped 5
cents to $96.33 after ending down 39 cents.
"The latest data shows that China will take measures to
ensure growth will stick to the government-set target of 7.5
percent," said Victor Shum, vice-president of energy consultancy
IHS Energy Insight.
"Supply concerns over Libya and Iraq will also keep oil
In the first nine months of the year, China's economy grew
7.7 percent from a year earlier, putting it on track to achieve
Beijing's 2013 target of 7.5 percent, though that would still be
China's worst performance in 23 years.
Economists in a recent Reuters poll saw the economy growing
an annual 7.5 percent in the fourth quarter from 7.8 percent in
Shum expects Brent to hold around the $108 a barrel mark
over the short term because of supply concerns amid steady
demand, while U.S. crude may trade between $95 and $100, rising
towards $100 as refiners in the world's top oil consumer return
from maintenance to soak up bulging inventories.
The improvement in the U.S. contract will help narrow the
price gap between the two contracts, Shum said. Brent's premium
over WTI had risen by nearly $5 over the past five
sessions, and expanded to as much as $13.60 a barrel overnight.
"The spread between the two has gone too wide, but I do
understand the reasons for it," said Shum. "Brent is being
supported by production issues, while WTI is being weighed down
by the rather big build in U.S. crude stocks."
The outages in Libya are putting a strain on global spare
capacity, a key factor influencing crude prices.
While the U.S. Energy Information Administration (EIA) said
global spare crude oil production capacity rose slightly in
September and October, a prolonged disruption in Libyan supplies
and concerns of growing unrest in Iraq mean the oil industry
will have to rely solely on top exporter Saudi Arabia to fill
any gap in output.
The spare output capacity, which is the amount of oil that
global producers can quickly bring on line without major
investment, and a key factor in global crude prices, averaged
1.8 million barrels a day in September and October, or 200,000
bpd higher than in the previous two months.
Brent may retest resistance at $108.46, while signals are
mixed for U.S. oil as it is not clear if the contract could
break a support at $95.78, said Reuters technical analyst Wang