By Barani Krishnan
NEW YORK (Reuters) - Brent fell almost 4 percent on Monday, narrowing U.S. crude's discount against the global oil benchmark to the lowest since January after an industry report of a large supply draw and government data forecasting lower output in U.S. crude.
Oil prices saw another tumble with the onset of mid-September trading as soft economic data out of China and weak gasoline prices pressured the market.
But a report from market intelligence firm Genscape estimating a drawdown of about 1.8 million barrels last week at the Cushing, Oklahoma delivery point for U.S. crude helped U.S. crude futures outperform Brent.
"It was a big draw," Scott Shelton, commodities specialist at ICAP in Durham, North Carolina, said, referring to the Genscape estimate, which compares against the previous largest drop of 1.9 million barrels noted for Cushing by the U.S. Energy Information Administration (EIA) in the week ended June 19.
In a separate report on Monday, the EIA forecast further drops in U.S. shale oil output in October after September's declines.
Also Read
Brent settled down $1.77, or 3.7 percent, at $46.37 a barrel, the lowest settlement in two weeks.
U.S. crude , also known as WTI, closed down 63 cents, or 1.4 percent, at $44.
The spread between the two , one of the most popular trades in oil, narrowed to $2.60 a barrel after reaching $2.49 earlier in the session for its smallest difference since Jan. 23. The spread hit a 14-month high above $13 in March when U.S. crude fell to 6-year lows.
Barclays, noting the narrowing gap between the two benchmarks when the spread hit a 3-month low earlier on Monday, said it expected the discount in U.S. crude to contract further.
"While the flat price in WTI crude oil has become more choppy, marked by alternating up and down days over the past week, relative performance versus Brent continues to improve," Barclays technical strategist Lynnden Branigan said in a note.
Brent has plunged from a June 2014 high above $117 to under $47 due to a global oil glut and worries about a slowing Chinese economy
"We think we are near the floor, but nothing precludes that we temporarily move lower," BNP Paribas global head of commodity strategy Harry Tchilinguirian told the Reuters Global Oil Forum on Monday.
Oil also fell on Monday after growth in China's investment and factory output missed forecasts in August, reinforcing chances that third-quarter growth may dip below 7 percent the first time since the financial crisis.
(Additional reporting by Lisa Barrington in London and Henning Gloystein in Singapore; Editing by Chris Reese, Cynthia Osterman and Andrew Hay)