Oil Rises on Brent Pipeline Closure, China Hopes

Oil rose to $111 a barrel on Tuesday, bucking a five-day losing streak, as the North Sea Brent pipeline remained closed for a third day and investors bet on strong Chinese oil demand.

Gains were limited, however, by medium-term concerns such as rising supplies, a fiscal crisis in the US and the downturn in the eurozone.

Brent crude futures rose 88 US cents to $110.97 per barrel at 2.51pm GMT, after touching $111.09 in earlier trade.

US crude added 53 US cents to $90.65.

The North Sea pipeline closure has helped halt a downtrend that saw Brent sink in the previous session to $109.58, the lowest since January 17.

"I view the gains so far this morning as more short covering off the pipeline news rather than any surge of new buying interest coming into the market," said Dominick Chirichella of the Energy Management Institute in New York.

The 80,000-barrel-per-day (bpd) Brent system was shut for the second time in seven weeks after oil and associated gas was found to have leaked into a leg of the 10,000 bpd Cormorant Alpha platform, which has been offline since January.

"For now, I still view the price move in the oil complex as a short covering rally in a downward trend," said Mr Chirichella.

"Certainly if the situation in the North Sea remains an issue for an extended period of time higher prices would follow," he said.

Investors were also cheered by China's vow to deliver economic growth at 7.5%.

The statement from outgoing premier Wen Jiabao countered concerns about demand in the world's second biggest oil market, after purchasing manager surveys over the weekend suggested growth in China's key manufacturing and service sectors may be slowing.

China's factory and services growth slowed to multi-month lows, two purchasing manager indices (PMI) showed, suggesting moderating growth in the economy.

In the US, about $85bn of automatic spending cuts that came into effect on Friday threw a cloud of uncertainty over growth prospects in the world's largest economy. The International Monetary Fund estimates the cuts, if fully implemented, will shave 0.5 percentage points from the country's growth rate.

Markets were now awaiting the US non-farm payrolls data due this week for further clues to the health of the US economy and the future of the Federal Reserve's monetary easing programme, analysts said.

US crude inventories may have climbed last week for a seventh straight week, according to a Reuters survey ahead of the release of weekly inventory data from the American Petroleum Institute later in the day.