Brent oil fell towards $103 per barrel on Tuesday, as worries about the demand outlook outweighed expectations the U.S. Federal Reserve and European Central Bank may do more to stimulate the global economy.
Increased supply from OPEC producers combined with weak German and Spanish data pushed oil off modest gains earlier in the session.
Brent fell 37 cents to $103.44 a barrel by 1300 GMT, after earlier touching a low of $103.17. U.S. crude was 25 cents lower at $94.24 a barrel, on track to end the month down 3.3 percent.
Oil has fallen 6 percent in April, heading for its biggest fall since last May as weak economic data darkened the demand outlook.
Underlining the difficulties facing the European economy on Tuesday, euro zone unemployment for June rose to 12.1 percent for March, while German retail sales fell for the second month running in March, confounding forecasts of a rise.
Spain's economy shrank for the seventh straight quarter from January to March, preliminary data showed, and the recession looks set to last into next year.
"In the last couple of weeks economic data all over the world has capped the upside, and until data shows a strong rebound, there's little chance for a bounce back," said Andy Sommer, analyst at EGL in Dietikon, Switzerland.
There was bearish news on the supply side of the equation too, with supply from the Organization of the Petroleum Exporting Countries set to average 30.46 million barrels per day (bpd), up from 30.18 million bpd in March, according to a Reuters survey.
Japan's crude oil imports from Iran rose 4.5 percent in March from a year ago, the same month that the world's third-largest oil importer won its third consecutive waiver from U.S. sanctions on Tehran for reducing shipments from the country.
Sommer said rising imports of Iranian oil by Japan indicated there would be less demand on oil from other regions, helping to keep supply ample.
"The presumption for tighter supply (because of sanctions on Iran) is not so valid and that will limit the upside for prices," Sommer said.
However, fears that economic recovery could be running out of steam have prompted growing confidence that the ECB and Federal Reserve could extend monetary measures to stimulate economic growth.
"The market believes there will be some more quantitative easing, and that should be supportive," said Bjarne Schieldrop at SEB in Oslo.
The U.S. Federal Reserve kicks off a two-day meeting later in the day and traders are waiting to see if a sluggish economic recovery and a slowdown in inflation could not only end talk of tapering bond buying but actually push the central bank into buying more.
The Fed is currently buying $85 billion of debt a month and the talk had been of when it might start to scale back. However, recent string of soft data have changed the conversation.
Inflation in the euro zone has fallen to a three-year low and unemployment is at a new record, data showed on Tuesday, raising expectations of an interest rate cut by the European Central Bank to reignite the stagnant economy.
Traders will also closely watch this week's data from China, the world's No. 2 oil consumer, that may show factory activity in April expanded at its fastest pace in 12 months.
The earlier private sector survey of purchasing managers, sponsored by HSBC, showed activity in China's industrial sector dipped in April as new export orders shrank. (Additional reporting by Luke Pachymuthu in Singapore; editing by James Jukwey)