* China factory activity slows for 2nd mth -private survey
* U.S. refinery strikes could hit short-term demand
* Prices down after soaring Friday as U.S. drilling dropped 7 pct
* Volatility puts end to January’s range-bound trading
* Brent sees record open interest as traders take new positions (Adds China data, comment; updates prices)
By Henning Gloystein
SINGAPORE, Feb 2 (Reuters) - Crude oil prices fell on Monday after U.S. unions called a refinery strike and traders cashed in on strong price gains last week when the market soared on a sharp drop in U.S. drilling.
Brent crude oil futures were trading at $51.93 a barrel at 0733 GMT, down $1.06, while U.S. WTI futures had dropped $1.01 to $47.24 a barrel.
Slowing manufacturing gowth in China also weighed on oil markets.
“Manufacturing activities are likely weakening amid slackening demand growth, even taking potential distortion from Lunar New Year (Feb. 19) into account,” Morgan Stanley said.
Activity in China’s factory sector shrank for the second straight month in January, a private business survey showed on Monday, as the new year got off to a rocky start for the world’s second-largest economy.
Monday’s fall in oil prices followed a jump back from six-year lows on Friday on the back of a record decline in U.S. drilling.
“Oil production in the shale basins will inevitably decrease as weaker, higher-cost producers shutter their operations. This supports our view that oil prices will recover this year and average $60 per barrel for Brent,” Nomura said.
Analysts said Monday’s declines were a result of profit-taking after last week’s gains, as well as rising OPEC-output offsetting lower U.S. drilling.
Potentially denting short-term demand for crude is a U.S. strike at nine refineries and chemical plants since Sunday.
Despite Monday’s falls, oil prices have broken out of a tight pattern within clear trendlines in January.
Along with returned volatility, Brent’s open interest - the number of outstanding futures contracts - rose to a record of 1.7 million, in a signal that traders took on new positions when prices hit lows last month.
With Brent back above $50 per barrel for the first time since early January its price also jumped above its 15 daily moving average value, a key technical indicator, for the first time this year.
Overall, Brent’s price curve remains in contango, meaning contracts for prompt delivery are cheaper than those further in the future. March 2015 Brent contracts are around $10 per barrel cheaper than those for delivery in March 2016.
“A recent pickup in interest for U.S. storage capacity and the chartering of tankers for floating storage plays illustrates the market reaction to the widening crude curve contango,” Timera Energy said.
Reporting by Henning Gloystein; Editing by Joseph Radford and Richard Pullin