SINGAPORE: Brent crude hovered above $109 a barrel on Tuesday ahead of data from China that may reaffirm signs of stabilising growth and fuel demand in the world's second largest oil consumer.
The oil benchmark fell 2 percent on Monday, its biggest percentage drop in six weeks, following weak economic data from Germany.
Traders also sold Brent to unwind bets on its spread with West Texas Intermediate (WTI) crude as a new pipeline and year-end crude stock drawdowns could reduce supply at WTI's delivery point in Cushing, Oklahoma.
Brent crude for January edged up 14 cents to $109.53 a barrel by 0315 GMT. The contract slipped nearly 2 percent on Monday, the biggest daily loss since Nov. 1.
US crude futures for January delivery was at $97.52 a barrel, up 18 cents, after its first decline in seven sessions on Monday.
Recent Chinese data put to rest fears about a hard-landing for the economy, while government reforms are expected to support demand for commodities such as energy and metals, Mark Keenan, a commodity strategist at Societe Generale in Singapore said.
"Closer to the Brent market, the German data has highlighted a reasonably disjointed recovery within Europe," he said. "Hence, we saw a pretty strong move yesterday combined with the reduction in speculative activity on Brent-WTI spread."
Germany's trade surplus narrowed in October while industrial output unexpectedly fell, signalling a mixed start to the fourth quarter for Europe's biggest economy.
Brent's premium to WTI narrowed about $7 in nearly two weeks as TransCanada Corp has begun filling a 700,000 barrel-per-day pipeline, which will transport crude from Cushing to Gulf Coast refiners.
"The inventories within Cushing and the landlocked pricing region can be drained quicker that has stimulated the liquidation of that spread which entails selling Brent and buying WTI," Keenan said.
WTI may strengthen further as US commercial crude oil stocks are forecast to have fallen for a second week last week by 2.7 million barrels, a Reuters poll of analysts showed.
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