* U.S. manufacturing activity slows to three-year low
* Positive China manufacturing data gave oil early lift
* Middle East tensions continue to support oil prices
* Coming up: API oil data, 4:30 p.m. EST Tuesday
(Updates throughout, adds settlement prices)
By Joshua Schneyer
NEW YORK, Dec 3 Brent oil prices turned lower on
Monday after data showed U.S. manufacturing activity slowed to a
three-year low, offsetting more optimistic figures from China.
Manufacturing in the United States, the No. 1 consumer of
oil, unexpectedly contracted in November, according to an
industry report from the Institute for Supply Management (ISM).
"The ISM data took away the momentum, but crude hasn't lost
that much ground," said Phil Flynn, analyst at Price Futures
Group in Chicago.
The ISM figures came after surveys from China, the world's
No. 2 oil consumer, showed that manufacturing expanded there in
November, adding to evidence that China's growth may be reviving
after seven consecutive quarters of slower expansion.
The Chinese data, coupled with rising tensions in the Middle
East - where the United Nations suspended Syrian aid operations
on Monday, citing unsafe conditions - had helped to boost oil
prices earlier in the day.
London-traded Brent crude fell 31 cents a barrel to
settle at $110.92, below its 200-day moving average, having
risen to more than $112 a barrel earlier on Monday.
U.S. crude futures rose for a third straight day,
gaining 18 cents a barrel to settle at $89.09. Earlier on
Monday, U.S. crude had topped $90 a barrel.
Brent's losses were attributed by some traders to bets on a
further narrowing of the price spread between Brent and its U.S.
counterpart. Brent's premium CL-LCO1=R fell below $22 a barrel
on Monday, down from as much as $23.42 last week.
Continuing uncertainty about negotiations on the U.S. budget
helped pressure oil prices and equities on Wall Street.
The U.S. dollar weakened, a move that can help to
strengthen oil prices since it makes the commodity cheaper for
holders of other currencies.
U.S. crude trading volumes were 18 percent below the 30-day
moving average, while trading in Brent crude was 17 percent
below the average.
Fuelling investor caution about demand for oil is the
uncertainty about talks on mandated U.S. tax hikes and spending
cuts investors fear may pull the world's biggest economy back
U.S. House of Representatives Republican leaders on Monday
called for $2.2 trillion in new deficit-reduction over 10 years
in their latest effort to avert an end-of-year "fiscal cliff".
Tensions in the Middle East, including violence in Syria,
protests in Egypt, and the fragility of a ceasefire between
Israel and the Gaza Strip's Hamas-led government, have continued
to stoke fears about potential oil supply disruptions from the
The U.S. dollar extended losses versus the yen and euro
after the disappointing ISM data.
Monday's final reading of HSBC's China manufacturing
Purchasing Managers' Survey (PMI) rose to 50.5 in November from
49.5 in October, the first time since October 2011 the headline
number has topped the 50-point line that indicates growth from
the previous month.
The HSBC survey followed the release on Saturday of a survey
from China's National Bureau of Statistics showing the pace of
growth in the manufacturing sector quickening. The official PMI
rose to a seven-month high of 50.6 for November, from 50.2 in
Investors will now await China's industrial output and trade
data to be released later this month for further confirmation of
(Additional reporting by Robert Gibbons in New York, Shadia
Nasralla in London and Ramya Venugopal in Singapore; Editing by
Sofina Mirza-Reid and Dale Hudson)