Brent Climbs Towards $101, Pulls Away From 16-Month Low

Brent crude rose towards $101 a barrel on Wednesday, pulling away from a 16-month low hit in the previous session, supported by encouraging US manufacturing data.

Benchmarks on both sides of the Atlantic plummeted the day before on a stronger dollar and the prospect of slowing oil demand growth in China and Europe.

US manufacturing activity hit a nearly 3-1/2-year high last month and construction spending rebounded strongly in July, data showed, raising hopes of higher oil demand in the world's biggest consumer of the commodity.

"The weak factory data in China and Europe led to concerns over demand destruction, and that's why prices dropped," said Avtar Sandu, a senior commodities manager at Phillip Futures in Singapore.

"The oil market is mainly driven by the demand side now. We don't see many issues on the supply side, and at the moment investors are hardly paying any attention to all the geopolitical events going on," he said.

Brent crude for October delivery was up 48 cents at $100.82 a barrel by 0651 GMT, after closing down $2.45 at its lowest settlement since May 1, 2013.

US crude was trading 43 cents higher at $93.31 a barrel. The contract had settled $3.08 lower than Friday's close, the lowest since January 14. There was no trading in the United States on Monday because of the Labor Day holiday.

A stronger dollar weighed on oil prices, after the currency rose to its highest since July 2013 against a basket of major currencies on Tuesday. A stronger greenback makes it more expensive for oil importing countries to buy the dollar-denominated commodity.

US Crude Stocks

A prolonged shutdown of the Buzzard oilfield in the North Sea could help to ease a glut of crude that has built in the Atlantic basin. The 200,000 barrel-per-day field may be shut for "up to 10 consecutive days" starting from August 30 when output was last stopped, Calgary-based Nexen said on Tuesday.

Buzzard is closely watched by oil traders worldwide as it is the biggest contributor to the Forties oil stream, the largest of the four physical crude grades that underpin the Brent benchmark.

US crude oil and refined product stockpiles were forecast to have dropped in the week to August 29, with crude oil stocks projected to have fallen by 1 million barrels, a preliminary Reuters survey of seven analysts showed on Tuesday.

The weekly oil inventory report from industry group American Petroleum Institute (API) due at 2030 GMT.

The more closely watched report from the US Department of Energy's Energy Information Administration (EIA) is due on Thursday. Both reports have been delayed by a day due to Monday's holiday.

Gasoline stocks, which have trended mostly at their five-year average this summer, are forecast to have fallen by 1.3 million barrels.

"The gasoline market is now shifting into a lower gear as the summer driving season draws to a close," analysts at BNP Paribas said in a note. "Product demand will seasonally weaken and offer less support to flat price."

EU officials proposed sanctions on Tuesday to starve Russian firms of cash as punishment for Moscow's role in Ukraine, where rebels said they were storming a key airport.

Russia's oil output rose 1 per cent to 10.52 million barrels per day (bpd) in August, showing that energy supplies so far have not been affected by sanctions over the country's military invasion of Ukraine.