Brent below $116 but pares losses on firm Asia shares

By Osamu Tsukimori

TOKYO (Reuters) - Brent crude futures inched lower on Monday after gaining more than 1 percent in the previous two sessions but they pared early losses as Asian shares firmed on mildly upbeat Chinese trade data.

The European benchmark gave up nearly 60 cents in early Asian trade as investors locked in profits on news that several prominent U.S. lawmakers said they had not been persuaded to approve strikes against Syrian President Bashar al-Assad's forces.

The Obama administration faces a crucial test vote set for Wednesday in the U.S. Senate on Syria. China urged the United States on Monday to proceed with caution and return to the United Nations to discuss Syria after Washington said it was not seeking Security Council approval for action.

Brent, which rose 1.9 percent last week amid worries over a U.S.-led strike against Syria, was down 21 cents at $115.91 by 0640 GMT after settling up 86 cents on Friday. Brent hit a one-week high of $116.56 in the previous session.

The losses in U.S. crude, which jumped more than $2 on Friday, were steeper, with the front-month trading down 42 cents at $110.11.

"After Friday's rally especially in WTI (West Texas Intermediate), some profit-taking took place in the morning, but firm equities in Japan on the back of Tokyo's winning Olympics bid and elsewhere supported the oil complex," said Masaki Suematsu, energy team manager at Newedge in Tokyo.

Rising equities broadly signal economic improvement, which would mean higher oil consumption.

Markets were also supported by data which showed China's broad exports rose more than expected in August, boosted by improving demand for the country's goods in major markets and adding to evidence that the world's second-largest economy may have avoided a sharp slowdown.

Geopolitical risks were kept elevated on Monday at a time when markets were already coping with a loss of additional supplies from Libya.

"There will be twists and turns in the U.S. seeking military action but the impact to oil markets is likely to be limited, as consumers chase alternative crudes from producers that have excess supplies," said Kaname Gokon, deputy general manager at Tokyo-based Okato Shoji Co.

"The overall sentiment is for the upside as supplies in Europe are tight amid declines in Libyan crude."

CHINA CRUDE IMPORTS FALL

The market also came under some pressure after crude oil imports by China, the world's largest buyer after the United States, hit a six-month low in August and were down 17.9 percent from July, trade data showed on Sunday, due to overhauls at several major refineries.

But imports in August were still up 16.5 percent from a year ago, taking total shipments in the first eight months of the year to 185.61 million tonnes, up 2.9 percent.

Oil investors are also watching for any firm signs on whether the U.S. Federal Reserve will begin to scale back its massive stimulus programme next week, sources said.

Comments from two Federal Reserve officials suggested the tapering plan is still on track. Esther George, the Kansas City Fed's consistently hawkish leader, said she favoured trimming the bond-buying programme. Chicago Fed President Charles Evans said he could be swayed towards a pullback.

Poor weather conditions halted sea traffic at all of Kuwait's ports on Sunday, state news agency KUNA reported citing the maritime authority.

(Editing by Tom Hogue and Muralikumar Anantharaman)