(Corrects figure for distillates stocks fall expectations in
paragraph 13 to 900,000 barrels.)
* China Jan flash PMI falls to 49.6, first contraction in 6
* TransCanada opens Gulf Coast line, breaking U.S. oil
* U.S. crude oil inventories rise 4.9 mln bbls -API
* Coming Up: EIA weekly crude stocks data; 1600 GMT
By Manash Goswami
SINGAPORE, Jan 23 Brent futures slipped below
$108 a barrel on Thursday as weak data from two of the world's
top oil consumers revived demand growth worries.
Activity in China's factory sector contracted in January for
the first time in six months as new orders declined, confirming
that a mild slowdown at the end of 2013 has continued into the
new year. In the United States, industry data showed a sharp
build up in crude stocks despite a bitterly cold winter.
Brent crude fell 32 cents to $107.95 a barrel by
0252 GMT, after ending up $1.54, the highest settlement since
Dec. 31. U.S. oil slipped 22 cents to $96.51, after
settling $1.76 higher at $96.73.
"The data is a bit concerning," said Ken Hasegawa, a
commodity sales manager at Newedge Japan. "There was a big
increase in U.S. crude oil stocks and now China PMI numbers are
worse than expected. That's making the market come off."
Most markets, including Asian shares and copper, fell after
the China data. The flash Markit/HSBC Purchasing Managers' Index
(PMI) fell to 49.6 in January from December's final reading of
50.5, dropping below the 50 line which separates expansion of
activity from contraction.
Brent may slip towards $107.50 a barrel during the day,
while the U.S. benchmark may fall towards $96, Hasegawa said.
Prices may also fall as some investors book profits after the
surprise rise in prices overnight.
Oil futures surged after TransCanada Corp began
delivering crude through a major new pipeline from Oklahoma to
the Gulf Coast, expected to help eliminate a bottleneck that has
warped the U.S. oil market for three years.
The pipeline may also narrow the price gap between the U.S.
benchmark and Brent. U.S. oil's discount to Brent settled at
$11.54, the smallest discount since Dec. 19.
Yet the gains overnight following the pipeline announcement
may have been overdone, Hasegawa said.
"I was a bit surprised to see the rise overnight," Hasegawa
said. "We may see some profit-taking as a result of the gains."
Investors are now awaiting official data on oil stockpiles
from the U.S. Energy Information Administration (EIA) to gauge
the demand outlook for the United States.
U.S. crude inventories rose by 4.9 million barrels in the
week to Jan. 17, to 355.7 million, compared with analysts'
expectations for an increase of 600,000 barrels, as refineries
cut output, the American Petroleum Institute (API) said.
Distillate stockpiles, which include diesel and heating oil,
fell by 2.3 million barrels, compared with expectations for a
900,000 barrel drop, the data showed.
Markets are also watching the progress in talks to end the
crisis in Syria. Syria's government and opposition, meeting for
the first time, vented their mutual hostility on Wednesday but a
U.N. mediator said the enemies may be ready to discuss prisoner
swaps, local ceasefires and humanitarian aid.
(Reporting by Manash Goswami; Editing by Anthony Barker)