Brent Holds Above $97, Eyes Worst Quarter Since 2012

Brent crude futures hovered above $97 a barrel on Tuesday, aided by firm U.S. and Chinese data, but the oil benchmark was on track for its deepest quarterly drop in more than two years on plentiful supplies.

* Underpinned by firm U.S. economic data, steady China PMI
* But plentiful supplies have dragged prices in Sept, Q3

$115.71 in June as investors focused on a well supplied market, although it has regained some footing since touching a 26-month trough last week.

Monday's upbeat U.S. consumer spending data for August added to signs of strength in the world's top economy, aiding oil prices.

"Although economic data from Europe and other regions have been sluggish, U.S. economic indicators, such as the upward revision of its gross domestic product data, have been firm," said Hiroki Kakuno, analyst at Japanese refiner Idemitsu Kosan.

"And oil demand, especially in the United States, is showing signs of firmness, supporting oil prices."
Brent for November delivery was up 8 cents at $97.28 per barrel by 0641 GMT. It has lost more than 13 percent for the third quarter, its worst quarterly performance since April-June 2012.

U.S. crude was up 2 cents at $94.59 a barrel, but also on track for its biggest quarterly drop since April-June 2012.

Brent has fallen nearly 6 percent this month and U.S. crude around 1.5 percent.

Activity in China's vast factory sector showed signs of steadying in September as export orders climbed, a private survey showed on Tuesday, easing fears of a hard landing but pointing to a still sluggish economy facing considerable risks.

"It was in line with the consensus and shows that China's economy continues to fluctuate," said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research & Consulting.

LIBYAN OUTPUT
Asian buyers imported less than 1 million barrels per day of Iranian crude for the first time this year in August as China's buys hit the lowest since the easing of Western sanctions, although intake was still up 6.4 percent from a year ago.

Iran has urged OPEC members to make coordinated efforts to help stem the decline in oil, but that has highlighted a split with others in the oil producers' group such as Saudi Arabia, which is playing down the price drop.

Providing some support, a strike has trimmed Libya's oil output by 25,000 barrels a day to 900,000 bpd, a spokesman for state-run National Oil Corp (NOC) said on Sunday, but production is still well up from a low of 200,000 bpd earlier in the year.

The market is paying close attention to news of Libyan output, Idemitsu's Kakuno said. "The question is whether the output recovers steadily to over a million bpd, but that is in doubt now," he said. "The key will be how much more the output grows and for how long the higher output lasts. I think output still lacks stability."

Brent's premium over WTI <CL-LCO1=R> narrowed to the smallest in 12 months on Monday, touching $2.57 a barrel.

"If Libya's output continues to recover, the price differential would likely narrow, with the possibility of WTI becoming higher again," Akuta said.

Japan's domestic oil product sales fell for the fifth straight month in August from a year earlier, down nearly 10 percent to 2.91 million bpd, trade ministry data showed on Tuesday.

The market is awaiting weekly oil data from the American Petroleum Institute later in the day.

U.S. commercial crude oil and distillate stockpiles were forecast to have increased in the week ended Sept. 26, while gasoline inventories probably fell, a preliminary Reuters survey of four analysts showed on Monday.

By Osamu Tsukimori