Brent crude oil steadied close to five-month lows around $106 per barrel on Friday as bleak U.S. data and bulging inventories dimmed the outlook for fuel demand.
Oil was set for its worst week of the year so far with Brent down 3.4 percent, its biggest weekly fall since December, and U.S. crude off 4.3 percent, its sharpest drop since September.
Data from top oil consumer the United States has disappointed with weaker-than-expected growth in manufacturing activity, lower-than-expected private sector hiring and higher jobless claims. A surge in U.S. crude inventories to the highest since 1990 has further pressured prices.
"Commodity markets are telling us the real story, and that is there is simply no demand out there," said Jonathan Barratt, chief executive of commodity research firm Barratt's Bulletin.
Brent crude was up 5 cents at $106.39 a barrel by 0915 GMT. It dropped to $105.29 on Thursday, its lowest since Nov. 5. U.S. crude edged down 10 cents to $93.16 a barrel, off a two-week low of $92.12 hit on Thursday.
Oil and commodities markets started 2013 in a buoyant mood on hopes of a sharp revival in global economic activity.
However, this optimism faded through the first quarter as data showed slower-than-expected growth in emerging economies, deepening recession in parts of Europe and a tepid expansion in the United States.
Even an aggressive move by the Bank of Japan to pump more than $1.4 trillion into the economy in less than two years failed to lift investor confidence.
U.S. data is likely to stay disappointing for a while, economists say. A Reuters poll predicted a 200,000 increase in U.S. jobs last month, down from 236,000 in February.
Abdallah Al-Badri, Secretary General of the Organization of the Petroleum Exporting Countries, said on Thursday oil prices were at a comfortable level for both producers and consumers.
But Badri told an oil conference in Paris that "if prices fall below certain levels, then many investors will find their developments no longer viable".
Analysts say OPEC could be forced to act if oil prices drop much further.
"At some point, OPEC will have to do something if prices fall below $100," said Carsten Fritsch, senior oil analyst at Germany's Commerzbank. "OPEC would either have to cut output, or at least, not increase production as they have been planning."
Investors also kept a wary eye on escalating tensions on the Korean peninsula and a standoff between Iran and the West over Tehran's disputed nuclear programme.
World powers meeting later on Friday in the Kazakh city of Almaty will urge Iran to accept their offer to ease some economic sanctions if it ceases its most sensitive nuclear work.
Although there is little chance of a breakthrough, the six powers, the United States, Russia, China, France, Britain and Germany, will be mindful of Israel's impatience with the current diplomatic efforts.
"This is always going to be in the back of the minds of investors. This quarter we should expect to see heightened tensions on the geopolitical front," Barratt said.
Investors are worried about risks from North Korea since it decided to ban entry to workers from the South to their joint industrial complex, and Washington made military moves and remarks showing that it takes Pyongyang's threats to attack the United States seriously.