Brent oil prices turned lower on Monday after data showed U.S. manufacturing activity slowed to a three-year low, offsetting more optimistic figures from China.
Manufacturing in the United States, the No. 1 consumer of oil, unexpectedly contracted in November, according to an industry report from the Institute for Supply Management (ISM).
"The ISM data took away the momentum, but crude hasn't lost that much ground," said Phil Flynn, analyst at Price Futures Group in Chicago.
The ISM figures came after surveys from China, the world's No. 2 oil consumer, showed that manufacturing expanded there in November, adding to evidence that China's growth may be reviving after seven consecutive quarters of slower expansion.
The Chinese data, coupled with rising tensions in the Middle East - where the United Nations suspended Syrian aid operations on Monday, citing unsafe conditions - had helped to boost oil prices earlier in the day.
London-traded Brent crude fell 31 cents a barrel to settle at $110.92, below its 200-day moving average, having risen to more than $112 a barrel earlier on Monday. U.S. crude futures rose for a third straight day, gaining 18 cents a barrel to settle at $89.09. Earlier on Monday, U.S. crude had topped $90 a barrel.
Brent's losses were attributed by some traders to bets on a further narrowing of the price spread between Brent and its U.S. counterpart. Brent's premium fell below $22 a barrel on Monday, down from as much as $23.42 last week.
Continuing uncertainty about negotiations on the U.S. budget helped pressure oil prices and equities on Wall Street.
The U.S. dollar weakened, a move that can help to strengthen oil prices since it makes the commodity cheaper for holders of other currencies.
U.S. crude trading volumes were 18 percent below the 30-day moving average, while trading in Brent crude was 17 percent below the average.
Fuelling investor caution about demand for oil is the uncertainty about talks on mandated U.S. tax hikes and spending cuts investors fear may pull the world's biggest economy back into recession.
U.S. House of Representatives Republican leaders on Monday called for $2.2 trillion in new deficit-reduction over 10 years in their latest effort to avert an end-of-year "fiscal cliff".
Tensions in the Middle East, including violence in Syria, protests in Egypt, and the fragility of a ceasefire between Israel and the Gaza Strip's Hamas-led government, have continued to stoke fears about potential oil supply disruptions from the region.
The U.S. dollar extended losses versus the yen and euro after the disappointing ISM data.
Monday's final reading of HSBC's China manufacturing Purchasing Managers' Survey (PMI) rose to 50.5 in November from 49.5 in October, the first time since October 2011 the headline number has topped the 50-point line that indicates growth from the previous month.
The HSBC survey followed the release on Saturday of a survey from China's National Bureau of Statistics showing the pace of growth in the manufacturing sector quickening. The official PMI rose to a seven-month high of 50.6 for November, from 50.2 in October.
Investors will now await China's industrial output and trade data to be released later this month for further confirmation of revived growth.
(Additional reporting by Robert Gibbons in New York, Shadia Nasralla in London and Ramya Venugopal in Singapore; Editing by Sofina Mirza-Reid and Dale Hudson)