By Keith Wallis
SINGAPORE (Reuters) - Brent crude futures slipped on Monday after a two-day rise, weighed down by weak Chinese factory data that could dent demand in the world's second biggest oil consumer, although hopes Beijing may unleash stimulus measures capped losses.
China's manufacturing activity shrank for a third straight month in March, a preliminary private survey showed, adding to a string of weak indicators this year that have reinforced concerns about a slowdown. The government is seeking to reduce the economy's dependence on exports, but investors are worried the growth is cooling faster than expected.
Brent crude for May delivery eased 18 cents to $106.74 a barrel by 0800 GMT. The oil benchmark fell for a fourth straight week last week. U.S. oil edged up 5 cents to $99.51 a barrel.
"There is no real support for Brent," said Tony Nunan, oil risk manager at Japan's Mitsubishi Corp. "I think the market is going to focus on supply (and it) is balanced to oversupplied."
But the weaker-than-expected numbers is also raising investor expectations the government could step in to stimulate the economy. While other commodities including copper came under pressure due to the weak numbers, Chinese equities climbed on hopes of a stimulus.
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"I think it will be done in a Chinese style," said Jonathan Barratt, chief executive of commodity research firm Barratt's Bulletin in Sydney, suggesting they could be targeted measures.
"The key is how it is actively worked."
Brent crude has lost almost 4 percent this year, eventually giving up gains after rising to $112 in early March, a more than two-month high, amid geopolitical risks as Russia took control of Ukraine's Crimea region.
The spread between the two benchmarks held at around $7 a barrel, narrowing from more than $10 in mid-March.
Concerns that tensions in the region could still worsen also helped stem further declines. NATO's top military commander said on Sunday Russia had built up a "very sizeable" force on its border with Ukraine and Moscow may have a region in another ex-Soviet republic, Moldova, in its sights after annexing Crimea.
Russian troops, using armoured vehicles, automatic weapons and stun grenades, seized some of the last military facilities under Ukrainian control in Crimea on Saturday. Russian President Vladimir Putin formally annexed the Black Sea peninsula the day before.
BRENT SUPPORT
"Further EU sanctions on Friday should support Brent on short covering early this week, despite seasonal demand remaining weak," analysts at ANZ said in a note.
Worries of continued unrest in Libya and other oil exporting countries have also a put a floor on oil prices, even though the market has come off with the end of the severe winter weather in the Northern Hemisphere, Nunan said.
Rebels have occupied ports and oilfields, disrupting Libya's oil production to less than 250,000 barrels per day, the state-run National Oil Corp said.
A pipeline problem further hit production at the southwestern el-Feel oilfield to between 50,000 and 60,000 bpd from 80,000 bpd, the state-run National Oil Corp (NOC) said on Sunday.
A commercial oil tanker seized by U.S. forces after it loaded crude at a Libya port held by anti-government rebels has docked back in the capital Tripoli, a Reuters witness said.
U.S. special forces boarded the tanker a week ago off Cyprus, days after it left Es Sider port, which is controlled by rebels who demand more autonomy and oil wealth in defiance of the central government.
(Reporting By Keith Wallis; Editing by Manolo Serapio Jr. and Michael Perry)