Oil up as Chinese imports rise, Italian election eyed

NEW YORK: Brent crude rose on Monday after official Chinese data showed strong demand in the world's second-largest oil consumer, but early gains were pared as uncertainty surrounding Italian election results weighed on the euro and spooked markets.

Chinese oil imports rose more than 7 percent in January from a year earlier, customs data showed, while its imports from sanction-hit Iran dropped by about a third, spurring fears of a tighter market.

"China's oil imports were up big in January," said Phil Flynn, an analyst at Price Futures Group in Chicago.

Robust demand growth from China contributed to a near $10 rally in Brent prices at the start of the year, but prices slipped 3 percent last week after oil industry sources said Saudi Arabia was preparing to increase second quarter output.

Brent crude rose around 1.5 percent on Monday to an early high of $115.87 a barrel, but by 1:15 p.m. EST (1815 GMT) was trading just 51 cents higher at $114.61 a barrel.

US crude was up 10 cents a barrel at $93.23, well off an earlier high of $94.46.

Exit polls from Italy's national election indicated the country could be heading for political stalemate, sparking fears of instability in the euro zone's third largest economy with center-left and center-right coalitions closely tied.

The euro reversed early gains of 1 percent to trade flat against the dollar, making dollar-priced commodities like oil less attractive to investors.

The center-right coalition led by former Prime Minister Silvio Berlusconi was leading in the race for the Italian Senate, dashing hopes of a pro-reform, center-left victory seen as crucial to dig the euro zone out of a debt crisis.

Oil traders were also waiting for Tuesday talks in Kazakhstan between Iran and global powers over Tehran's disputed nuclear program.

The six world powers, known as the P5+1, are set to offer Iran some relief from international sanctions if it agrees to curb production of higher-grade enriched uranium, a US official said on Monday.

Investors are also awaiting Tuesday's 10:00 a.m. testimony from US Federal Reserve Chairman Ben Bernanke for clues on whether, and at what levels, the Fed will maintain its bond-buying stimulus program.

The S&P 500 was down 0.2 percent in midday trade.

Financial markets were rattled last week after minutes of the Fed's January meeting suggested some Fed officials were mulling scaling back its strong monetary stimulus earlier than expected.