U.S. Oil Up on Weak Dollar, China Weighs on Brent

U.S. dollar slumps to 3-month low against Japanese yen.

U.S. oil prices rose on Monday as a weak U.S. dollar prompted buying, while Brent prices fell as concerns about China's slowing economy dragged global equities down and outweighed low Libyan output.

The U.S. dollar fell to its lowest in more than three months against the yen, making dollar-denominated commodities cheaper for buyers using the Japanese currency.

Shanghai shares hit a three-week low and European equities slumped after data on Sunday showed growth in average new home prices in China slowed to a near one-year low in April.

Meanwhile, Libya's major western oilfields, El Sharara and El Feel, remained shut a week after the government said it reached a deal with protesters to reopen them. National output has been capped at 210,000 barrels per day (bpd), far below the 1.4 million bpd produced until mid-2013.

Heavily armed men stormed the parliament in Libya's capital of Tripoli on Sunday and demanded its suspension, causing Saudi Arabia to close its embassy there on Monday.

U.S. crude for June delivery rose 65 cents to $102.67 a barrel by 11:16 a.m. EDT (1516 GMT) as the contract traded in light volume ahead of its expiration on Tuesday.

Brent crude was down 13 cents to $109.62 a barrel, having climbed to an earlier intra-session high of $110.33 a barrel on the violence in Libya.

"U.S. crude is being lifted by expectations that it is the U.S. economy that is growing and, also, because of the dollar's weakness," said Phil Flynn, an analyst at Price Futures Group in Chicago. "The early rationale for crude being up was the Libya situation, but now it looks like Brent is being affected by worries about the global economy."

UKRAINE, IRAN

The conflict in Ukraine kept supporting oil, as U.S. President Barack Obama and French President Francois Hollande said Russia faced significant costs if it continues "provocative and destabilizing behavior".

Russian President Vladimir Putin ordered military forces to return to permanent bases after drills near Ukraine, the Kremlin said, although the Pentagon said it saw no indication of Russian troop movement away from the border.

A disruption to Ukraine's natural gas supplies seemed to be put off for now as Europe's Energy Commissioner said progress was being made in the gas price dispute between Russia and Ukraine, with a fresh round of negotiations scheduled for May 26.

Russia supplies around a third of Europe's gas demand and about half of its gas imports from Russia flow through Ukraine. In recent weeks, Moscow has threatened to cut off or reduce Kiev's natural gas if the country does not pay outstanding debts.

By Elizabeth Dilts