Oil edged lower on Monday, retracing strong gains late last week as traders weighed the International Energy Agency's dramatic oil demand downgrade against data showing Chinese crude imports rose to their second-highest ever.
As trading activity slowly picks up speed following the Good Friday holiday, dealers will be looking equally for confirmation of the grim demand outlook from the US government and further evidence that the world economy may be bottoming out, aiding a return to risk assets that has buoyed stock markets.
US crude for May delivery slipped 25 cents to $51.99 a barrel by 2238 GMT on Monday, the first day of trade since Thursday's nearly 6 percent gain on the back of a rally on Wall Street, which closed out its fifth weekly gain.
The IEA said on Friday that world oil demand will dive by a hefty 2.4 million barrels per day to 83.4 million bpd this year, a one million bpd downgrade from its previous monthly report.
"I think everyone out there is trying to gauge when the recession is going to bottom out. We can't say definitively that global GDP is not going to worsen," said David Fyfe, head of the oil industry and markets division of the IEA.
The US Energy Information Administration will release its own short-term energy outlook on Tuesday.
At the same time, however, preliminary Chinese trade data on Friday showed crude oil imports rose by more than a quarter versus February to the highest in a year in March and were just short of a record, as refiners replenished stocks.
Steady but bouncing
Prices ended last week almost unchanged from the previous week, closing for a fourth week at between $51 and $53 a barrel, even as intra-week trade bounces in a $47-$54 range.
Other evidence also grew stronger that traders are expecting some stability to return after oil's dramatic collapse from a $147 record high to nearly $30 in December, with implied 30-day volatility based on options prices falling last week to near 60 percent, its lowest since early October.
News that Saudi Arabia would trim oil supplies to some of its Asian customers also limited the downside, suggesting that the world's top exporter may be more anxious than some of its OPEC peers about the swollen state of global inventories.
The IEA said inventories in developed countries rose to 61.6 days of forward cover in February, far above the roughly 52 days cover that many in OPEC consider comfortable.
Adding support was news that Royal Dutch Shell said on Sunday it had shut down flowstations feeding into its Trans-Niger oil pipeline in southern Nigeria as a precautionary measure after a fire at a manifold, although the scale of the outage on oil flows was not immediately apparent.
US stock markets jumped on Thursday, led by a surge in bank Wells Fargo after it said it expects a record quarterly profit, with the focus this week on earnings from Goldman Sachs, JPMorgan and Citigroup.