Brent steadies above $116 on economy hopes, Middle East worries

Positive US employment numbers and confirmation of a mild recovery in China, evidenced by purchasing manager surveys, allayed some concerns about weak fuel demand from the world's two biggest oil users.

"We are now seeing a consistent story of moderate growth in the US and China, which is supportive of oil prices in general," said Ric Spooner, chief market analyst at CMC Markets in Sydney. "This will probably be a week of consolidation."

Brent traded 14 cents lower at $116.62 per barrel at 0340 GMT, holding near a 4-1/2-month high of $117.07 reached on Friday. It has risen for three straight weeks.

US crude slipped 18 cents to $97.59 per barrel, after rising for eight straight weeks, the longest such winning streak since July-August 2004.

Brent's premium to US crude widened to above $19 per barrel on Friday, a level last seen in early January, on swelling inventories in Cushing, Oklahoma.

Traders expect stocks at Cushing to keep building as the Seaway pipeline, which had been expected to absorb some of those stocks, may not be able to run at full capacity until the second half of the year.

"I won't be surprised to see (the widening differential) continue as the market is still adjusting for the fact that Seaway's (drawdown) won't be as much as anticipated," Spooner said.