June 3, 2013 / 8:26 PM / 6 years ago

UPDATE 9-Oil prices rise as weak U.S. data sinks dollar, N.Sea outage

* US manufacturing activity contracts in May to 4-year low

* China factory activity shrinks, raising demand worries - PMI

* North Sea Buzzard oilfield expected back up mid-wk

* Rhine oil barge traffic hit by European flooding

* Coming up: API oil data on Tuesday (Adds settlement prices, details)

By Jeanine Prezioso

NEW YORK, June 3 (Reuters) - Crude oil futures rose on both sides of the Atlantic on Monday, reversing the previous session’s losses, on the back of weak U.S. economic data that sent the dollar plunging and lifted oil prices.

A supply outage in North Sea crude oil also helped maintain higher Brent crude oil prices earlier in the day.

Oil producer Nexen said its North Sea Buzzard oilfield, which supplies Forties, the leading stream behind the Brent benchmark, was shut and expected to return to normal by mid- week.

Weak U.S. manufacturing data, that showed activity contracted in May to a four-year low, crushed the U.S. dollar and supported higher oil prices.

Brent crude futures settled the day $1.67, or 1.66 percent, higher at $102.06 per barrel, rebounding from a slip below $100 to $99.66 earlier in the session on weak Chinese data.

The HSBC/Markit Purchasing Managers’ Index (PMI) for China, the world’s second largest oil consumer, fell to 49.2 in May, showing a contraction in manufacturing for the first time in seven months.

Brent prices hit their lowest price point in one month, then settled with the biggest one-day percentage gain also in one-month.

U.S. crude oil futures settled $1.48, or 1.61 percent, higher at $93.45 per barrel, the biggest one-day percentage gain in one month.

The dollar index, which tracks the U.S. dollar against a basket of currencies, traded as much as 1 percent lower on Monday.

Oil is priced in dollars and when the dollar sinks, oil becomes less expensive for holders of other currencies. The weak dollar also boosted gold, which jumped 2 percent.

Weak data served a dual supportive role. It pushed the dollar lower and reinforced the idea that the U.S. Federal Reserve would keep its quantitative easing policy.

“People are no longer rooting for good data, they’re rooting for bad data. It’s this idea that if the data is bad enough that the Fed will still be there. It distorts the whole field of investing,” said Walter Zimmermann, chief technical analyst with brokerage United ICAP.

“You’ve created a situation where the underlying economy has not recovered, which I think needs to be said more frequently and more loudly.”

Oil prices were expected to remain choppy, and could go lower, underscored by the outlook for slack demand growth with robust supplies, several analysts said. Record high U.S. supplies and a weak global economic outlook has kept a lid on higher prices.

Brent crude was rising off three previous sessions of losses, but was still only able to touch the 10-day moving average on the high end of the session. Brent has fallen for four straight months from a high of $119.17 in February.

Prices are still rangebound and all the market was doing was giving back Friday’s losses, Zimmermann said.

“It’s not as if it’s breaking new ground to the upside.”

Oil was also supported by flooding across Europe, which halted barges along the river Rhine, and by supply worries after reports that Iran aimed next year to start a nuclear reactor, which the West fears could arm an atomic bomb. (Additional reporting by Christopher Johnson in London and Manash Goswami in Singapore; editing by William Hardy, Keiron Henderson, Andrew Hay, David Gregorio and Marguerita Choy)

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