Brent Slips Towards $100 as China PMI Disappoints

Brent crude slipped towards $100 a barrel on Tuesday after manufacturing data from China pointed to a lukewarm recovery in the second quarter, denting the outlook for fuel demand in the world's second largest oil consumer.

The flash HSBC Purchasing Managers' Index for April fell to 50.5 in April from 51.6 the month before as new export orders shrank in China, suggesting the country faces considerable headwinds.

June Brent crude had dropped 34 cents to $100.05 a barrel by 0244 GMT, whileU.S. crude for June delivery was down 40 cents at $88.79 a barrel.

"It's disappointing data from the previous month, but it's still above 50," said Tetsu Emori, a commodities sales manager at Astmax Investments in Tokyo. "I'm happy to buy on dips."

The PMI's 50-point level demarcates growth from contraction from the month before.

Brent settled above $100 on Monday for the first time in five sessions as traders saw oil below the psychological level as a bargain. The benchmark has fallen 10 percent from about $111 in early April on global growth concerns.

(Read More: Oil's Tumble Could Be Great for Europe)

The decline has sparked speculation that OPEC could re-look at supply at its May 31 meeting although Libya has said it would seek to increase its output quota.

"Brent below $100 makes it very difficult for Middle East producers to balance their budgets," Emori said.

In response to China's moderate growth, Saudi Arabia is expected to keep oil output steady throughout the second quarter after a 700,000 barrels per day (bpd) cut in the last two months of 2012.

Nigeria Tensions

Fighting in Africa's top energy producer Nigeria and a force majeure on Bonny Light crude exports also put a floor under Brent prices.

The country's oil production is beset by widespread oil thefts that had forced Royal Dutch Shell to shut its 150,000 bpd Nembe pipeline last week.

Yet supply could rise elsewhere in Africa and the Middle East with the restart of South Sudan's oil production and a lifting of European Union sanctions on Syrian crude exports.

(Read More: Growth Worries? Asia Should Hail That Oil Price Fall)

The U.N. nuclear agency said it is talking with Iran to set a date for discussions on resuming an investigation there, after Iranian media reported that talks were set for May 21.

Investors will scour weekly oil inventories data from the United States due on Tuesday and Wednesday to gauge demand in the world's largest oil consumer.

U.S. commercial crude oil stockpiles are forecast to have climbed last week on increased imports, and oil products are also seen higher, a preliminary Reuters poll of five analysts showed on Monday.

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