LONDON: Brent crude oil steadied above $107 a barrel on Monday, weighed down by concerns about demand growth but supported by a weaker dollar and fears over supply disruptions.
Investors have been rattled by the slowdown in China, where manufacturing output has stalled in recent months, and are awaiting more economic data to help gauge the demand outlook.
Brent crude rose 58 cents to $107.75 a barrel by 1040 GMT, after ending 48 cents lower on Friday and sliding for a second straight week. US oil rose 29 cents to $104.99 after settling 79 cents down in the previous session.
"We expect some more jittery trading in oil," said Andrey Kryuchenkov, oil and commodities strategist at Russian bank VTB Capital in London. "Any macro related correction would be limited due to ongoing short-term supply worries."
Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt said the market appeared fairly balanced but investors had been "taking money off the table after a strong run-up a couple of weeks ago."
"There is potential for a further correction lower, particularly after a rise in speculative long positions," Fritsch said.
Hedge funds took huge positive bets on US crude last week just before the market turned south. Positive wagers by money managers on US crude reached a record high for the week ended July 23, data from the Commodity Futures Trading Commission showed.
Data on the positions on Brent crude and gasoil on the Intercontinental Exchange (ICE) were due at 1100 GMT.
A weaker dollar helped support oil.
The US currency slumped to a one-month low against the yen on Monday, reflecting expectations that the Federal Reserve will offer forward guidance on Wednesday that it intends to keep interest rates low for some time.
The dollar often moves inversely to oil as many key commodities are priced in the US currency.
Oil was also bolstered by supply worries.
The North Sea's Forties pipeline has cut pumping rates by about 40,000 barrels per day (bpd) because of maintenance, trade sources said, tightening supply of the crude that underpins the Brent benchmark.
Explosions rocked the eastern Libyan city of Benghazi on Sunday, while protests in Egypt fuelled worries the conflict may spill over into other countries in the Middle East.
Operations at Libya's two main crude oil export terminals, Es Sider and Ras Lanuf, halted on Monday due to strikes, shipping and trading sources said.
But global oil production remains robust. US crude output hit its highest since 1990 in the week ended July 19, data from the Energy Information Administration showed.
Investors are eyeing official data this week from China on its manufacturing sector after an initial reading from HSBC showed activity at its slowest in 11 months in July.
They are also awaiting a two-day policy meeting by the Federal Reserve starting on Tuesday. If the Fed confirms it will reduce its bond purchases by September, that could fuel another commodities selloff. A delay could spur a rally.
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