* China factory activity falls to 3-month low in August
* Iraqi, Kurd forces gain on Sunni militants
* Libya output rises to 700,000 bpd
* Russia-Ukraine tensions rise; EU prepares new sanctions
By Jacob Gronholt-Pedersen
SINGAPORE, Sept 1 Brent crude held steady above
$103 a barrel on Monday, as a recent rebound in oil prices was
checked by fresh data suggesting a slowdown in China's factory
Oil prices on both sides of the Atlantic registered a second
straight month of losses in August, although prices gained
around $1 a barrel towards the end of the month.
Growth in China's factory sector slipped to a three-month
low in August as foreign and domestic demand cooled, an HSBC
survey showed on Monday. That may strengthen fears of a slowdown
in demand for commodities, including oil.
"A fair bit of weak sentiment around China has already been
priced in," said Ankit Pahuja, a commodity strategist at ANZ
"China has held to a 7.5 percent growth target, so the
government does have plans to maintain growth across the next
couple of quarters," Pahuja said.
Brent crude for October delivery was 1 cent lower at
$103.18 a barrel by 0416 GMT. The contract had gained 73 cents
on Friday. U.S. crude traded 18 cents lower at $95.78 a
barrel, after settling $1.41 higher.
Floor trading in the U.S. is closed on Monday for the Labor
"Our view is that oil prices will strengthen a little over
the next month or so. Markets have been a bit complacent
regarding supply risks, and probably overestimated return in
supply from places like Libya and Iran," Pahuja said.
Libya's oil production has ticked higher in recent months,
rising to 700,000 barrels per day (bpd), state-run National Oil
Corp (NOC) said on Sunday, putting it 50,000 bpd higher than
what was reported early last week.
IRAQI AIR STRIKES
Geopolitical tension continued to support oil prices, with
Iraqi army and Kurdish forces closing in on Islamic State
fighters on Saturday in a push to break the Sunni militants'
siege of a town in northern Iraq, while the United States
carried out air strikes there.
In Russia, President Vladimir Putin called for talks on the
"statehood" of southern and eastern Ukraine, while his Ukrainian
counterpart Petro Poroshenko said his country was close to
all-out war with Russia.
The escalation could result in new Western sanctions against
Russia, the world's biggest oil producer, although sanctions
imposed so far have not directly affected energy supplies.
Head of Russian major Rosneft, Igor Sechin, said
Russian oil and gas companies will honour their supply contracts
despite sanctions and tensions with the West.
Iranian President Hassan Rouhani said on Saturday that new
sanctions against Tehran over its nuclear programme "put into
question the seriousness, honesty and good faith of negotiations
with the U.S."
"They are in conflict with the spirit of talks. They are
unconstructive in my opinion," Rouhani said at a news
conference, although he later suggested there was still hope of
reaching a deal by the Nov. 24 deadline.
In other news, Egypt's oil ministry said the United Arab
Emirates would provide "about $9 billion" worth of petroleum
products to Egypt over the next year in deal to come into effect
(Editing by Tom Hogue)