Brent crude oil prices slipped but held above $119 per barrel on Monday as the prospect of a third round of liquidity stimulus by the United States continued to support commodities despite slower economic growth around the globe.
Brent June crude futures were down 35 cents to $119.48 a barrel by 1352 GMT, on track to close down for the second consecutive month. U.S. crude was down 80 cents at $104.13 a barrel.
Analysts and traders said the market was effectively trading sideways following data on Friday that showed slower-than-expected U.S. GDP growth in the first quarter, raising expectations of a fresh liquidity injection.
The Chicago purchasing management index for April came in at 56.2, missing a consensus forecast for 61, and lower than March's 62.2.
James Zhang, energy analyst at Standard Bank, said the market was in a cautious mood ahead of a heavy week for U.S. data releases.
"The market is undecided, but if anything there is a slightly bearish bias given that the weekly U.S. jobless report has disappointed over the last few weeks. That potentially points to a downbeat non-farm payroll report on Friday," he said.
But he added that whenever U.S. data show signs of weakness, the market sees a greater possibility of another round of monetary easing.
"So we are getting a tug-of-war between what is going on in the real economy and what the central banks might do with monetary policy. Prices will swing up and down within a fairly narrow range for a bit unless the data really surprises," he suggested.
In Europe, Spain's economy slipped into recession in the first quarter as domestic demand shrank against a background of deep government spending cuts.
Although GDP declined 0.3 percent quarter-on-quarter and 0.4 percent year-on-year, this was not as bad as analysts had forecast. "The Spanish GDP number, which could have been depressing came in a bit above expectations but not much," said Filip Petersson, commodity strategist at SEB.
Trading volumes are expected to be fairly light today because of the May Day bank holiday across much of Europe on Tuesday. This may limit oil price moves.
"It's still in the same range as Friday and because of the European holiday tomorrow, a lot of people are out today as well, which is making the market very quiet," said Christopher Bellew, a trader at Jefferies Bache in London. "It's very much sideways at the moment."
Analysts expressed surprise at how well oil was holding up given the bearish newsflow of the past few weeks.
"This is despite the fact that tensions with Iran have eased, which should reduce the risk premium, and there are signs that growth momentum is slowing in the two-largest oil consuming nations, the United States and China," said Carsten Fritsch, an energy analyst at Commerzbank in Frankfurt.
SEB's Petersson said equity markets had run a bit ahead of crude, which could be providing some support. But he added that the oil supply factor should continue to weigh, with over-production from Saudi Arabia.
"There is an Armada of tankers heading towards Asia from the Middle East so there's a general feeling of over-supply in the market," he said.
OPEC output in April hit its highest level since 2008 as extra crude from Iraq, Saudi Arabia and Libya more than compensated for the lowest Iranian supply in two decades ahead of an EU embargo, a Reuters survey found on Monday.
Speculator positioning in U.S. crude oil futures and options was mixed in the week to April 24, CFTC data showed on Friday, with traders cutting their positions on the New York Mercantile Exchange (NYMEX) but raising them in London.
Meanwhile, data from the IntercontinentalExchange (ICE) showed that speculators turned bearish on the outlook for Brent, cutting back their net long positions as Brent futures prices dipped.
Investors will scour data on Chinese PMI on Tuesday and U.S. employment on Friday for a better read on the economic health of the world's two largest oil consumers. (Additional reporting by Florence Tan in Singapore; Editing by Anthony Barker)