Oil slipped below $123 a barrel on Monday, following a 14 percent rise in the first quarter, as economic contraction in Europe outweighed a brighter outlook in China and global supply concerns.
The euro zone's manufacturing sector shrank for an eighth month in March, according to Markit's Eurozone Manufacturing Purchasing Managers' Index. In contrast, China's official Purchasing Managers' Index hit an 11-month high in March.
Brent crude slipped $1.04 to $121.84 a barrel by 1323 GMT. Its first-quarter rise of 14.3 percent was the biggest advance since the first three months of 2011. U.S. crude fell by 70 cents to $102.32.
"We had some slightly positive Chinese data. The market is drifting in this broad sideways range, but Iran will keep it above $120," said Christopher Bellew, a broker at Jefferies Bache in London.
Brent has fallen from its 2012 high of $128.40 reached on March 1, and analysts said there were signs of waning investor enthusiasm.
The U.S. Commodity Futures Trading Commission said on Friday speculators trimmed net long U.S. crude and options positions in the week to March 27. But speculators lifted net long positions in Brent and gasoil futures and options to a record high.
"Financial investors, who were one of the driving factors behind the rise in oil prices in the first two months of this year, would appear to (be) becoming more sceptical," said analysts at Commerzbank in a report.
Following the Chinese PMI figures, investors will be keeping an eye on U.S. manufacturing data - the ISM index - for signs of economic health in the world's biggest oil user.
Oil was supported by the prospect of supply disruptions. U.S. President Barack Obama said on Friday there was enough oil in the market to allow countries to cut imports from Iran, OPEC's second-largest producer.
Iran and six world powers will meet in Turkey on April 13-14 for a round of talks over Tehran's disputed nuclear programme, U.S. Secretary of State Hillary Clinton said on Saturday.
While threats to Iranian supply are the main worry for oil markets, actual supply has been cut in Syria, Yemen and South Sudan. On Sunday, Sudan and South Sudan accused each other of launching attacks in the oil-producing area straddling their border.
Top global exporter Saudi Arabia is pumping almost 10 million barrels per day, the highest in decades, and insists there is no shortage of supply. OPEC production overall is at the highest since 2008, according to a Reuters survey. (Reporting by Alex Lawler in London and Francis Kan in Singapore; Editing by Alison Birrane and Jane Baird)