Brent crude held above $123 in volatile trade on Tuesday which saw prices fall on worries about demand from slowing economies in China and Europe, but fears of a disruption in Iranian supplies held up the market.
Investors are worried that oil consumption will suffer as the euro zone maybe facing its second recession in three years, and that demand from China may be hit by a cut in its 2012 growth target to an eight-year low of 7.5%.
Iran's long-running dispute with the West over its nuclear programme added to the market's fears. Israeli Prime Minister Benjamin Netanyahu showed no sign of backing away from possible military action against the Opec member following a meeting with US President Barack Obama on Monday.
Front-month Brent crude inched up 10 cents to $123.90 a barrel by 0725 GMT, after climbing to a daily high of $124.39 and falling to a low of $123.53. US April crude gained 25 cents to $106.97.
"Traders seem reluctant to hold positions before this week's spate of important economics data," Ben Taylor, a sales trader with CMC Markets, said in a note on Tuesday.
"Also causing concern is the Greek bondholders' acceptance of the haircut and roll-over into longer dated bonds. If a two-thirds majority acceptance does not occur it's widely believed that the Greek government could force full participation and thus trigger a default."
Greece needs to complete a bond exchange with private holders, set to close on March 8, before a second bailout is paid.
Euro zone private sector surveys showed a sharp downturn in activity at Italian and Spanish businesses dragged the currency bloc back into decline last month. Growth slowed in Germany, the region's biggest and strongest economy, and stalled in France.
While the US services sector expanded in February at its fastest pace in a year, new orders for factory goods dropped in January, data showed.
Investors are also watching for China's industrial output, investment and retail sales data due Friday to see how the world's second-largest economy is weathering the global downturn.
Adding to the bearish mood is data likely to show US crude oil stockpiles have risen for the third straight week last week. The weekly report from the American Petroleum Institute is due later on Tuesday.
The International Atomic Energy Agency (IAEA) added to the concerns about Iran's nuclear programme on Monday, saying there were indications of activities at an Iranian military site its inspectors want to visit.
"The supply risk premium to Iran is supporting prices, but the main volatility is from the demand side," said Jeremy Friesen, a commodity strategist at Societe Generale.
"The market has already priced in China's target growth cuts as they know it is trying to ease the economy and people believe China has the capacity to anticipate any unexpected slowdown."
China appears determined to push forward with market-oriented fuel price reforms that would boost prices in the near term, as they are consistent with its aim of restructuring the economy towards more efficient energy use, JP Morgan analysts said in a note on Monday.
If consumers believe that price reforms are around the corner, they will tend to hoard crude and products, they said.
"This could add to the precautionary inventory building we may be seeing globally at the secondary and tertiary level due to worries over Iran," the JP Morgan note said.