“Oil slipped back below $111 per barrel on Monday, after the effect of constructive Chinese economic growth data faded, and investors focused on news that the U.S. manufacturing sector contracted for the first time in more than three years.
The latest readings from both official and private sector surveys of China's vast manufacturing sector showed activity picked up November, adding to evidence the economy is reviving after seven quarters of slowing growth. Yet crude reversed course after ISM data showed U.S. manufacturing unexpectedly contracted in November.
The Institute for Supply Management (ISM) said its index of national factory activity fell to 49.5 in November from 51.7 the month before, its weakest showing in more than three years.
Brent crude shed early gains to trade near $111 per barrel, down 19 cents on the session. U.S. crude gave up most of the day's early gains to trade below $90 per barrel.
The ISM data stood in contrast to Markit's U.S. Purchasing Managers Index for the manufacturing sector, which rose to 52.8 in November, marking further gains in expansion territory.
Turmoil in the Middle East also supported oil. Egypt's top court shut down over Islamist protests and Syrian forces pounded rebel-held suburbs around Damascus with fighter jets on Sunday.
The HSBC Purchasing Managers Survey (PMI), which focuses on China's private export-oriented manufacturers, rose to 50.5 in November, inching above the 50-mark that separates growth from contraction for the first time in 13 months.
Investors will now be awaiting China's industrial output and trade data later this month for further confirmation of steady growth revival in the world's biggest energy consumer.
Concern over the United States' fiscal deficit and talks on the upcoming fiscal cliff, a $600 billion package of tax hikes and spending cuts which may plunge the world's biggest economy into deep recession, also helped keep oil price gains in check.
The package takes effect at the end of the year and President Barack Obama's administration and congressional leaders are trying to work toward a deficit reduction.”