Brent falls to near $111 as China crude imports slow

Brent crude fell to near USD 111 on Thursday, snapping six days of gains, after trade data from China pointed to slower demand in the world's second-largest oil consumer.

China's September crude oil imports shrank from the previous month despite expectations of a gain in demand as new refineries opened and some units restarted after scheduled maintenance.

Total exports from the world's largest factory were also lower than expected, dealing another blow to investors already worried about the worsening sovereign debt crisis in Europe and a possible recession in the United States.

Brent crude for November fell 25 cents to USD 111.11 a barrel by 0301 GMT, after a gain of 11.6% over the previous six sessions.

US November crude slipped 77 cents to USD 84.80 a barrel, after tumbling to an intraday low of USD 84.64.

"Exports growth in September was much lower than market expectations, showing the sputtering external economy, and we expect the slowing export trend to continue in the coming months," said Wang Hu, an analyst at Guotai Junan Securities Co. in Shanghai.

The weaker Chinese data came after global oil forecasting agencies cut 2011 demand estimates this week, stressing risks to growth because of gloomy economic conditions.

"Some of these adjustments will probably help support the view that demand will be slowing for oil in conjunction with any weakness in GDP growth," said Chen Xinyi, an analyst at Barclays Capital in Singapore.

However, the US government was the most bullish forecaster as it increased its oil demand estimate for 2012.

Brent-WTI spread widens

Brent's premium to US crude stayed at above USD 26 a barrel. The spread widened following a decision on Tuesday by the Dow Jones-UBS Commodity Index, which had some USD 80 billion in tracking funds at the middle of the year, to add Brent as a component in 2012 and reduce the weighting for the US-traded West Texas Intermediate.

"It could be a situation that some investors have switched from WTI to Brent at the front of the curve that helped to support Brent prices," Chen said.

Tighter supply stemming from production issues in the North Sea and lower output forecasts from oil producers such as Azerbajian may also underpin prices.

"It doesn't seem like prices could come down soon, although there's a 20% chance that a bad case scenario for the global economy could pan out," Chen said.

Geopolitical tensions brewed as Saudi Arabia and the United States traded charges with Iran on Wednesday over an alleged plot to kill the Saudi ambassador to Washington, deepening divisions and sharpening a contest for power in the oil-rich Gulf.

In Europe, growing hopes that the euro zone is a step closer to expanding its financial rescue fund to help contain the region's debt woes and head off a systemic banking crisis shored up Asian equities on Thursday.

Investors are watching on Thursday for US government oil inventories data, which is expected to show a build in crude stockpiles as imports rebounded and refinery utilization rates fell.