Brent crude oil fell on Friday, following a two-day, $3 rally, as weak economic data from the United States sounded a note of caution on growth prospects in the world's largest oil consumer.
Oil and other commodities such as metals slid in a midday selloff that traders said may have been prompted by fund liquidations as European markets closed for the weekend. Later, Brent pared losses in the afternoon.
"The markets tend to overreact. The oil market got knocked off its knees and grabbed some legs," said Dan Flynn, an analyst and trader at Price Futures Group in Chicago, Illinois.
Even after Brent's biggest one-week gain since November 2012, it remains more than 6 percent below where it started April. A string of disappointing reports in recent weeks from the United States, China and Germany have stoked fears of global economic slowdown.
Traders said low trading volumes indicated a lack of conviction in this week's rally. Volumes for U.S. crude were 22 percent lower than the 30-day moving average and 11 percent lower for Brent.
On Friday, the Commerce Department reported U.S. gross domestic product expanded at a 2.5 percent annual rate in the first quarter, slower than the 3.0 percent rate expected. The data fed worries about a deceleration in the second quarter and U.S. equity markets fell for most of the session.
Brent slipped 25 cents a barrel to settle at $103.16 a barrel after touching a low of $102.25. U.S. crude settled down 64 cents at $93.00 after going to $92.06 at midday.
U.S. crude prices have skidded from over $97 at the beginning of April to below $86 by mid-month.
"The market rebounded pretty strongly in the past week. We bounced from $85 close to $94 and it looks as if what you're seeing today is a little bit of profit-taking," said Gene McGillian, an analyst with Tradition Energy in Stamford, Connecticut.
Brent's premium to U.S. crude futures edged higher Friday after settling below $10 on Thursday for the first time since January 2012, closing at $10.16.
"The Brent trade is still providing a study in contrasts as the curve structure is strengthening amidst further weakening in Brent-WTI," Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, wrote in a research note.
"The market has gone through a period of relatively robust North Sea production, thus weakening the Brent side of the spread, while market participants are less concerned with the overhang of crude oil in the U.S. Midwest as the ability to move oil out of the region continues to increase," Dominick Chirichella of Energy Management Institute said.
Ritterbusch cautioned that the spread could reverse course to widen next week, citing elevated supply at the U.S.'s Cushing, Oklahoma hub, and reduced availability of Nigerian oil and lower Norwegian production beyond next month that could move Brent higher.
The Commodities Futures Trading Commission (CFTC) said Friday that money managers raised their net long U.S. crude futures and options positions in the week to April 23.
Money managers went short heating oil, however, selling 15,900 contracts to arrive at the largest short position seen since January of 2007, Tim Evans, energy specialist at Citi Futures Perspective wrote in a research note.
Oil has been supported by a tightening of global inventories over the past two months, according to a report from the U.S. Energy Information Administration, as well as by ongoing tensions in the Middle East.
Members of the U.S. Congress are calling for action on Syria after a report showed the likely use of chemical weapons by the Syrian government. (Additional reporting by Robert Gibbons in New York, Peg Mackey in London, Florence Tan in Singapore; Editing by Alden Bentley and David Gregorio)