* Brent topped $100 for the first time since Oct. 2008 on
Monday
* Technicals show U.S. crude headed for $94
* Coming Up: U.S. API weekly inventory statistics
By Alejandro Barbajosa
SINGAPORE, Feb 1 (Reuters) - Oil retreated on Tuesday as
China's factory growth slowed to a five-month low, signalling
demand may not rise as quickly in the world's second-largest oil
user, while Egypt's social upheaval kept Brent crude firmly
above $100.
Monetary tightening to contain inflation caused China's
purchasing managers' index (PMI), an indicator for factory
activity, to fall to a lower-than-expected 52.9 in January from
53.9 in December, official data showed.
Brent crude for March slid 50 cents to $100.51 a
barrel at 0302 GMT, after topping $100 for the first time since
October 2008 on Monday, when prices touched an intraday high of
$101.73. U.S. crude shed 25 cents to $91.94.
"$100 is not a final target" for Brent, said Tetsu
Emori, a fund manager at Tokyo-based Astmax Co Ltd.
"$110 and $115 could be reached by the end of the year.
People now have to take geopolitics into consideration. Even if
nothing happens in Egypt, it allows investors to take on
additional risk and develop long positions in the hope of making
more money."
Egypt's anti-government protesters, scenting victory after
President Hosni Mubarak agreed to discuss sweeping political
reforms, rallied support for what they hope can be a
million-strong march for democracy on Tuesday.
Mubarak's newly appointed vice-president began talks with
opposition figures and the army declared the protesters demands
"legitimate" and said it would hold its fire.
At the moment, Egypt's unrest poses no direct threat to
ships passing through the strategic Suez Canal, connecting the
Red Sea with the Mediterranean, a senior official with London's
marine insurance market said on Monday.
"While the current tensions have raised some concerns about
an eventual impact on logistics, we note that physical oil
supply has not been affected," Credit Suisse analysts including
Stefan Graber said.
"While short-term risks remain skewed to the upside, we
think that the current price strength is likely to ease once the
situation in Egypt normalizes. Spare OPEC production capacity
remains ample, which should prevent a rapid tightening of the
market balance."
The Organization of the Petroleum Exporting Countries says
it holds about 6 million barrels per day (bpd) of idle
production capacity -- equal to 7 percent of world demand --
that it could tap to fill any shortage. Most of this capacity is
held by Saudi Arabia.
OPEC is concerned by unrest in Egypt but sees no need for an
immediate boost in its output as there is no shortage of oil,
the group's top producer Saudi Arabia and its leading official
said on Monday.
U.S. crude inventories likely rose 2.8 million barrels last
week on higher imports, while colder weather drew down
distillate stockpiles by 1.2 million barrels, a Reuters poll of
analysts showed.
The industry-funded American Petroleum Institute will issue
its weekly data on U.S. oil inventories later on Tuesday,
followed by the government's Energy Information Administration
report on Wednesday.
(Editing by Himani Sarkar)
