Brent crude eased below $110 a barrel on Monday after Chinese manufacturing data missed market expectations, signalling the potential for slower demand growth in the world's second-largest oil consumer.
China's official purchasing managers index for March came in at 50.9, the highest in 11 months, although a Reuters poll showed economists had expected a rise to 52.0 from February's five-month low of 50.1.
Brent crude for May delivery was down 33 cents at $109.69 a barrel by 1115 GMT from Thursday's close, after slipping 1 percent in the quarter just ended. In early trade the Brent contract hit a session high of $110.20, the highest since March 15.
"The data came in below market expectations, which could indicate that oil demand growth may not expand quite as quickly as we would like it to," said Carl Larry, president of Oil Outlooks and Opinion, based in Houston.
"But China's still growing, and that continues to be an underlying support factor long term for the market. Whether they are at 6 percent or 7 percent, they are growing."
U.S. crude was down 46 cents at $96.77 a barrel, after hitting a six-week high of $97.80 earlier in the session. West Texas Intermediate crude gained nearly 6 percent in the January-March period.
Trading in both Brent and WTI was shut on Friday ahead of the Easter holiday.
Oil underperformed equities last quarter, with the S&P U.S. shares index last week surpassing a previous record reached in October 2007.
Oil was depressed by global economic worries and failed to fully benefit from large money printing programmes by central banks around the world.
"The S&P 500 might be breaking records, but the S&P Goldman Sachs Commodities Index continues to be weak, and its returns for the quarter are only plus 0.55 percent, and that follows two years that have provided no returns," Olivier Jakob from the Petromatrix consultancy said.
SUPPLY FLOW CONCERNS
This week will be rich in economic data, including euro zone unemployment due on Tuesday and U.S. non-farm payrolls and unemployment due on Friday.
"The coming weekend will bring a major price risk, with the next round of negotiations in Almaty between the P5+1 (the five members of the U.N. Security Council plus Germany) and Iran," Jakob said, adding that progress in nuclear talks between Tehran and the West would put downward pressure on oil prices.
Saudi oil minister Ali al-Naimi said on Monday he saw demand for Saudi crude exports rising over the next few months, signalling a potential increase in supply from OPEC's leading nation and the world's largest oil exporter.
The premium of Brent versus U.S. crude narrowed to $12.32 earlier in the Asian trading session, the narrowest since July, but later widened to around $13 per barrel, little change on the day.
Analysts said concerns about crude supplies to U.S. Gulf Coast refineries were affecting WTI prices on Monday after Exxon Mobil was forced to close a pipeline due to a leak.
Exxon's Pegasus pipeline, which can carry more than 90,000 barrels per day (bpd) of crude from Illinois to Texas.
"This leak prompted a very fast reaction and reinforced the concerns of opponents of the Keystone XL pipeline, which is currently awaiting U.S. government approval," David Wech from JBC Energy consultancy said.
The proposed 800,000 bpd Keystone XL pipeline would carry heavy crude from Canada's tar sands to the Gulf Coast refining hub. Environmentalists have expressed concerns about the impact of developing the oil sands and say the crude is more corrosive to pipelines than conventional oil.
Wech said the spread between Brent and WTI could narrow further after South Korea confirmed it would close a tax loophole, which had encouraged imports of North Sea crude.
"We could see that support fade given the tax change," he said. (Editing by Clarence Fernandez and Jane Baird)