* Obama, aides confront sceptical Congress on Syria strike
* Unrest, sanctions remove 2.7 mln bpd oil output - Deutsche Bank
* China PMI hits 16-mo high; Euro zone grows fastest in 2 yrs
* Four cargoes of N.Sea benchmark Forties deferred into October (Recasts, updates prices paragraph 4, adds French report, Forties delays)
LONDON/NEW YORK, Sept 2 (Reuters) - Benchmark Brent crude oil prices eked out a small gain on Monday, reversing a deep early slide amid upbeat economic data, North Sea output woes and a new French report on Syria’s use of chemical weapons.
Oil had fallen by more than $2 a barrel in opening trade after U.S. President Barack Obama said at the weekend that he will seek congressional authorisation for punitive military action against Syria, almost certainly pushing back any air strikes until Washington’s summer recess ends on Sept. 9.
But the market’s mood turned more bullish throughout the day, with traders buoyed by improved factory activity in China and the euro zone, news of delays to benchmark North Sea Forties oil production and a French intelligence report that may bolster the case for military action to punish Syrian President Bashar al-Assad for a reported chemical weapons attack on Aug. 21.
Brent futures rebounded from a $2 drop early in the day to rise 35 cents or 0.3 percent to settle at $114.36 a barrel. The U.S. benchmark fell 83 cents to trade last at $106.82 per barrel at 1pm EST, the end of a thinly traded, holiday-shortened day. It had dropped as low as $104.21.
Due to the Labor Day holiday, the U.S. market will not issue a settlement price for Monday’s activity.
Brent rose nearly 3 percent last week, its biggest weekly gain since July, on worries a strike against Syria would disrupt Middle East oil exports at a time when markets are already coping with the loss of supplies from Libya and Sudan.
While Obama’s decision to seek congressional approval on Syria cooled pre-weekend speculation of an imminent attack, a nine-page report drawn up by France’s military and foreign intelligence services - and released to lawmakers on Monday - listed five points that suggested Assad’s fighters were behind the assault, a government source told Reuters.
“The Syrian crisis has not gone away,” said David Hufton, managing director of London brokerage PVM Oil Associates.
“There is only so much uncertainty that markets can take before they go into full scale safe-haven lockdown. With the Middle East in such turmoil, we would argue that oil will be regarded as the commodity safe haven.”
While hedge funds ramped up bets on the possibility of future supply disruptions in the Middle East, immediate outages lent further support to prices, analysts said.
Four cargoes of North Sea Forties crude oil - the largest of the four grades that make up the Brent benchmark - have been delayed into October from September due to lower-than-expected production, trade sources said on Monday.
Tightening European markets helped push the October Brent premium to U.S. WTI crude up by more than $1 to $7.55 a barrel, its widest since June. CL-LCO1=R
A report by Deutsche Bank on Monday estimated more than 2.7 million barrels per day of oil supply had been lost to the market through civil war, unrest, sanctions and disruption to production in half a dozen countries from Libya to Britain.
Data on Monday suggested economic growth was picking up.
China’s factory activity expanded at its fastest in more than a year in August with a jump in new orders, official data showed. A private survey showed China’s factory activity expanded for the first time in four months in August as domestic demand rebounded.
In the euro zone, strong orders for manufactured goods helped the bloc’s factory activity rise at the fastest pace in over two years last month and led to backlogs of work for the first time since mid-2011, a survey showed. (Reporting by Christopher Johnson in London, Manash Goswami in Singapore and Jonathan Leff in New York; editing by William Hardy, Bernard Orr)