NEW YORK Oil rose on Monday in choppy trading as supportive expectations that the U.S. Federal Reserve will act to stimulate the economy were countered by weak data from China that raised concerns about demand for oil.
Some investors believe that more indications of an economic slowdown in United States have increased the likelihood that the U.S. Federal Reserve's two-day policy meeting ending on Thursday will result in a third round of bond buying, known as quantitative easing or QE3.
Additional stimulus is expected to weaken the dollar, which can boost the price of dollar-denominated commodities like oil. The euro fell against the dollar for the first time in four days on Monday. <USD/>
Brent October crude rose 56 cents to settle at $114.81 a barrel, having traded from $113.92 to $115.05.
The Brent October contract expires on Thursday.
U.S. October crude edged up 12 cents to settle at $96.54 a barrel, after slumping more than a $1 to $95.34. The session peak of $96.63 was 2 cents above the $96.61 200-day moving average, a technical indicator closely watched by traders.
Total crude trading volume turned tepid, with Brent and U.S. crude turnover lagging their 30-day averages by 14 percent.
U.S. RBOB gasoline futures pushed higher and Monday's $3.0450 a gallon session peak was within sight of the $3.0541 October contract high.
U.S. heating oil gained half a percent.
"The market is clearly betting on a third round of quantitative easing from the United States," said Tamas Varga, analyst at PVM Oil Associates in London.
"The Chinese data were pretty bearish as were U.S. jobs figures last week. But it is a twisted logic: bad news can be good news if it leads to a positive policy response."
China's crude oil imports fell 12.5 percent in August from a year earlier to the lowest daily rate since October 2010, while implied oil demand in China fell to 8.92 million barrels per day (bpd), underlining sputtering domestic demand as the global economic outlook darkens.
China's industrial output growth slowed to 8.9 percent year-on-year in August, the weakest since May 2009, while total imports were down 2.6 percent, against expectations for a 3.5 percent rise.
Maintenance in the North Sea, where Brent crude is produced, has cut output this month and lent support to oil prices near term, along with the disruptions to U.S. Gulf of Mexico production after Hurricane Isaac.
Less than 8 percent of oil output and just over 6 percent of natural gas production remained shut on Monday, U.S. regulators said.
U.S. crude oil and fuel inventories likely fell last week, according to a Reuters survey of analysts on Monday, with imports and production having only just begun to recover after the storm interruption.
Saudi Oil Minister Ali al-Naimi said on Monday the Kingdom was concerned about rising oil prices, with Brent crude rising by more than 25 percent since late June.
"Saudi Arabia will, as always, take all necessary steps to ensure the market is well supplied and to help moderate prices - and we will meet any additional demand from our customers," Naimi said.
Production from the three big Gulf producers saw a net increase of around 400,000 bpd in August as a sharp rise in Kuwaiti output outweighed cuts by Saudi Arabia and the United Arab Emirates (UAE), Gulf industry sources said.
The possibility that the United States and other consumer governments will tap strategic oil reserves has also helped limit price gains, traders and analysts said.
The civil war in Syria and Iran's ongoing dispute with the West over Tehran's nuclear program have fuelled concerns about the potential for the region's oil supply to be disrupted.
The U.N. International Atomic Energy Agency pressed Iran on Monday to grant inspectors immediate access to the Parchin military site, where the IAEA suspects Tehran may have conducted tests relevant to nuclear weapon development.
Yukiya Amano, IAEA director general, said it was "frustrating" that the IAEA and Iran had made no concrete progress in talks that began in January.
(Additional reporting by David Sheppard in New York, Christopher Johnson in London, Osamu Tsukimori in Tokyo and Ramya Venugopal in Singapore; Editing by Bob Burgdorfer and Alden Bentley)