Brent crude edged higher on Monday as North Sea oilfield maintenance and violence in the Middle East helped offset weaker global factory data that fed doubts about the energy demand outlook. US crude fell to its lowest settlement in more than a month as the dollar firmed, reversing earlier gains on optimism about a pending deal to raise the US debt ceiling.
Brent crude for September delivery recovered late in the day to settle up 7 cents at $116.81 a barrel. It had seesawed lower earlier, after briefly trading above $120 in the morning. US crude for September dropped 85 cents to settle at $94.89 a barrel, its lowest closing price since late June. Brent turned positive in part due to pipeline and platform maintenance in the North Sea that could affect European supply this week.
BP said the North Sea Forties Pipeline System will be closed for five days this week to allow workers to remove an unexploded mine from World War II that was discovered submerged in water near the pipeline. France's Total shut its North Sea Elgin platform, which pumps 104,000 barrels per day of condensate, for summer maintenance, the company said without disclosing the duration of the maintenance.
"The continued problems in the North Sea, Forties in particular, are supporting Brent and helping boost its premium to the US counterpart," said Tom Bentz, director at BNP Paribas Commodities Futures Inc in New York. In the latest escalation of turmoil in the Middle East, Syrian military tanks shelled the city of Hama, bringing the death toll from days of clashes there to at least 85, and western leaders voiced outrage at the attacks. Republican and Democratic party leaders agreed late Sunday to the terms of a deficit reduction plan that would avoid default and raise the US debt ceiling. Congress still must vote to approve the deal.
"The initial euphoria of the debt deal seems to be waning," said Gene McGillian of Tradition Energy in Connecticut. "There's still plenty of uncertainty surrounding the debt deal ahead of congressional votes, and a disappointing ISM number has now taken some of the bidding out of the market."
After initially rising, stock markets also fell, with US equities dropping for a sixth consecutive session. US crude broke below its 200-day moving average price of $94.94, a move that can sometimes precede heavier levels of technical selling. Data from Germany showed primary German energy use fell by 3.2 percent in the first half of 2011 from the same period of 2010, in part due to high oil prices.
Cyprus may soon have to seek an international debt bailout if it fails to repair its finances, the island's largest commercial bank warned on Monday. Several US oil and gas producers were ramping up oil output in the Gulf of Mexico following dissipation of Tropical Storm Don, which had forced several oil platforms to shut down since late last week. Meteorologists were still watching a tropical wave in the eastern Atlantic that could become Tropical Storm Emily, potentially moving through the Gulf of Mexico oil region as it approaches the southern US coastline by the end of the week.
US government figures showed that only around 2.3 percent of US Gulf of Mexico oil production remained shut mid-Monday due to Don, down from as much as 6 percent on Sunday. A major Asian refinery, Formosa's 540,000 bpd plant in Taiwan, will shut down for repairs lasting 1-2 weeks at least, following a fire over the weekend, a spokesman said. The shutdown may last longer, pending an investigation after the Formosa refinery had its seventh fire in a year.
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