5 Min Read
* US crudes discount to Brent hits 19-month low below $6/bbl
* Brent dips below $100 before recovering
* China credit crunch bolsters oil demand concern
* Fighting in Lebanon sparks fears of Syrian spillover
By David Sheppard and Jeanine Prezioso
NEW YORK, June 24 (Reuters) - Brent and U.S. crude prices rose on Monday, rebounding off a three-week low as record flooding in Canada's main oil-producing province threatened exports to the United States.
Major Canadian pipelines that move almost 1 million barrels per day (bpd) of Alberta oil sands crude remained shut on Monday after a spill on a smaller line was discovered over the weekend, a spokesman for operator Enbridge Inc said.
The threat to Canadian exports overshadowed fears that a credit crunch in China could hit demand in the world's No. 2 oil consumer, which sent Brent beneath $100 a barrel in early trade, extending a near-5-percent slide last week.
The U.S. West Texas Intermediate (WTI) benchmark had the bigger bounce - more than $3 a barrel off a trough of $92.67, the lowest since June 4. WTI's discount to Brent narrowed to its smallest since November 2011, touching $5.91 a barrel.
"Imports from Canada should be down," said Phil Flynn, analyst at Price Futures Group in Chicago. "That's supporting U.S. crude futures versus Brent."
Brent crude for August delivery settled up 25 cents at $101.16 a barrel, after bottoming at $99.67. Last week Brent fell 4.7 percent.
U.S. crude for August delivery settled up $1.49 at $95.18 a barrel, rallying off of a three-week low of $92.67.
Traders are also watching for the restart of a major crude processing unit at BP's Whiting refining in Indiana, which draws crude from Cushing, Oklahoma, delivery point of the WTI benchmark.
BP was starting up the revamped crude distillation unit at its 405,000 bpd refinery on Friday, sources familiar with Whiting's operations said.
"The Enbridge pipeline problems (in Canada) and the Whiting, Indiana, refinery restart equals a WTI rally," said John Kilduff, partner at Again Capital LLC in New York.
A Reuters poll of energy analysts showed U.S. crude oil stocks likely fell last week due to lower imports and higher refinery activity. The American Petroleum Institure publishes its report on U.S. energy stocks on Tuesday, followed by the U.S. Energy Information Administration on Wednesday.
Trade in Brent was choppy as investors weighed whether a near $6 sell-off in ten days was overdone. Lingering fears that a liquidity crunch in China and the potential withdrawal of monetary stimulus from the U.S. Federal Reserve could hit the world economy and lower oil demand have pressured prices.
China's central bank said on Monday the overall liquidity in the financial system was at a reasonable level after interest rates for short-term funds last week rose to extraordinary levels as big commercial banks held back on lending in the interbank market.
Oil traders feared this could slow China's economic growth further. The International Energy Agency lowered its 2013 oil demand growth forecast for China earlier this month.
Trade in the U.S. dollar was also choppy as investors weighed whether U.S. monetary stimulus will be scaled back in the near term. The greenback strengthened early in the session before slipping back, helping crude prices to recover by making it cheaper for holders of other currencies.
Oil prices were also supported by growing fears Syria's civil war is dragging in other countries, with deadly bomb attacks in Iraq and fighting in Lebanon.
Lebanese soldiers stormed a complex holding gunmen loyal to a radical Islamist cleric in the Lebanese port city of Sidon on Monday and arrested dozens of his supporters, security sources said, in a second day of clashes fuelled by Syria's civil war.
The fighting has been the deadliest outbreak in Lebanon since Syria's two-year conflict began, with at least 12 soldiers killed in the southern Mediterranean port city.
In Baghdad ten car-bomb explosions killed at least 39 people across the city on Monday, police and medical sources said, adding to the worst sectarian violence in six years.