* Euro zone manufacturing slows more than expected
* China factory activity drops to 3-month low in August
* Supply risks persist as Libya descends into chaos
* Russia-Ukraine tensions rise, EU prepares new sanctions
By Henning Gloystein and Christopher Johnson
LONDON, Sept 1 Brent crude oil prices dipped on
Monday as manufacturing growth faltered in Europe and China at a
time of ample supply, although the risk of production setbacks
remained high in Libya where the government has lost control of
most of the capital.
Euro zone manufacturing growth slowed more than expected
last month and factory activity in several key countries
appeared to be stagnating. French factory output fell at its
fastest in 15 months in August.
Chinese factory growth slipped to a three-month low in
August as foreign and domestic demand cooled, and the country's
huge construction sector is also seeing a slowdown, muddying the
outlook for demand from the world's key consumer of most
"In China, diesel demand growth has been pressured by a
slowdown in construction activity linked with the ongoing
property market correction, which our economists expect to
continue," Barclays said in its latest Oil Market Outlook.
"Indian oil demand is growing faster than that of China so
far this year," it added.
Brent crude was 47 cents lower at $102.72 a barrel
by 1702 GMT. U.S. crude traded 10 cents lower at $95.86 a
barrel, although floor trading in the United States was closed
on Monday for the Labor Day holiday.
"Crude prices appear to have stabilised," said Michael
Wittner, oil analyst at French bank Societe Generale.
"However, there are significant factors that will prevent a
near-term price recovery," he added. "Exports of Libyan light
sweet crude are growing, and increasing volumes of crude are
being placed in storage, which will maintain downward pressure."
Libya's oil production has increased 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
levels reported early last week.
But news the Libyan government has lost control of most
ministries and state institutions in Tripoli after armed groups
took over the capital has raised doubts over whether the recent
output levels in the country can continue.
In Iraq, the army and Kurdish forces have been battling
Islamic State fighters in a push to break the Sunni militants'
siege of a town in northern Iraq, while the United States
carried out air strikes near the town.
Yet exports from Iraq's southern oil port have remained
unaffected by the fighting. Russia's Gazprom Neft and
Korea Gas Corp (KOGAS) said on Monday they had
started commercial production at the joint Iraqi Badra oilfield
with initial output at 15,000 barrels per day (bpd).
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 those imposed
so far have not directly affected energy supplies.
Head of Russian oil major Rosneft, Igor Sechin,
said Russian oil and gas companies will honour their supply
contracts, despite sanctions and tensions with the West.
Traders added that stuttering North Sea oil output was
lending prices some support.
Output from Britain's Buzzard field, an important
contributor to the Brent oil price benchmark, has stopped again
after restarting last week as the field endures a hesitant
return to full output after summer maintenance.
(Additional reporting by David Sheppard in London, Jacob
Gronholt-Pedersen in Singapore; editing by Keiron Henderson)