Oil prices fell on Monday on concerns about slowing growth in China and recession in Italy, along with reduced fears of immediate supply disruption because of tensions with Iran.
China posted its largest trade deficit in at least a decade, fanning worries about lower fuel demand in the world's second largest economy, while final data confirmed Italy was in recession and that its economy contracted in the fourth quarter.
Last week's moves by the West and Iran to revive talks on Tehran's disputed nuclear program have eased fears of an immediate crisis and a resulting disruption of oil supplies.
A more supportive economic picture in the United States, after February nonfarm payrolls data showed strong employment growth, left investors eyeing Tuesday's Federal Open Market Committee meeting for any indications about whether the U.S. Federal Reserve will maintain its loose monetary policy.
Brent April crude ended 64 cents lower at $125.34 a barrel, after three straight higher settlements, having swung from $124.20 to $125.98. The April Brent contract expires on Thursday.
U.S. April crude fell $1.06 to settle at $106.34 a barrel, also snapping a string of three higher closes and ending below the 10-day moving average at $106.69 after dropping to an intraday low of $105.38.
"You have growth concerns in China with their trade deficit and Italy confirming it's in recession and worry about Spain and with no more provocative headlines over the weekend and talks still expected, some of the Iran fear premium is being taken off," said Phil Flynn, analyst at PFGBest Research in Chicago.
Brent's premium to U.S. crude CL-LCO1=R strengthened and ended at $19 a barrel based on settlement.
Total crude trading volume was anemic, with both Brent and U.S. crude turnover less than half a million lots traded with an hour left in post-settlement trading, leaving turnover well under the 30-day averages.
Implied volatility, as measured by the Chicago Board Options Exchange's Oil Volatility Index, fell to an 11-month low of 29.92 percent.
U.S. stocks were little changed as China's economic data and caution ahead of the Fed's FOMC announcement gave investors reason to pause to digest recent gains.
European stocks slipped as optimism about the completion of Greek's debt swap deal gave way to concerns about Spain and other peripheral countries, while last week's strong U.S. jobs data damped expectation of further stimulus from the U.S. Federal Reserve.
The prospect of over-supply and weakening demand in top consumer China pressured key industrial feedstock copper, snapping that market's three-day rally.
While China's deficit raised questions about the global economy's appetite for its goods and its energy demand growth, China's crude imports and implied oil demand reached record levels in February, rebounding after a dip in January, official data released on Saturday showed.
IRAN TENSIONS
With the European Union's embargo on importing Iranian crude looming in July, Japan's ambassador to Tehran was quoted by Iranian media on Sunday as saying that Japan will continue to import as much Iranian crude oil as it needs.
U.S. President Barack Obama tried to defuse some of the talk of war with Iran last week, saying it was in everyone's interest for a peaceful solution to be found.
Despite Iran's most powerful authority, Ayatollah Ali Khamenei, greeting favorably the more conciliatory sentiments from Washington, Iranian President Mahmoud Ahmadinejad said the Islamic Republic does not fear military action, in a fresh response to the West reported by Iranian media on Sunday.
U.S. CRUDE INVENTORIES
U.S. crude oil inventories are expected to have increased last week, a preliminary Reuters survey of analysts showed on Monday ahead of weekly stockpile data.
Total distillate stocks and gasoline inventories were expected to be lower, the survey showed.
The initial inventory snapshot is due from industry group the American Petroleum Institute on Tuesday at 4:30 p.m. EDT (2030 GMT), with the government's data following on Wednesday.