Oil prices fell in Asian trade on Monday, wiping out some of the gains of the previous session amid worries lower growth targets in China could cut oil demand and ongoing concern over Russia's compliance with a global deal to cut oil output.
But worries over escalating violence in the Middle East put a floor under prices.
Brent crude futures dropped 20 cents, or 0.4 per cent, to $55.70 a barrel as of 0459 GMT after settling 1.5 per cent higher in the previous session.
US West Texas Intermediate (WTI) crude futures fell 23 cents, or 0.4 per cent, to $53.10 a barrel after closing the previous session up 1.4 per cent.
“The main drag affecting markets today is the lowering of growth targets by China and tighter regulatory controls which implies less demand for oil and commodities in general,” said Jeffrey Halley, senior market strategist at Oanda brokerage in Singapore.
China aims to expand its economy by around 6.5 per cent this year, Premier Li Keqiang had said in his work report at the opening of the annual meeting of parliament on Sunday.
That is lower than the 6.7 per cent growth achieved last year.
China also plans to cut steel and coal output this year in an effort to tackle pollution, its top economic planner had said on Sunday, while China's newly appointed banking regulator vowed on to strengthen supervision of the lending sector.
Meanwhile, figures by Russia's energy ministry released last week showed February oil output was unchanged from January at 11.11 million barrels per day (bpd), casting doubts on Russia's moves to rein in output as part of a pact with oil producers last year.
That came as oil prices rose on Friday as the dollar weakened modestly after a speech by US Federal Reserve Chair Janet Yellen, which suggested a rate increase would come at the end of its two-day meeting on March 15.
A weaker dollar bolsters commodity prices, including oil. While a rate hike would be supportive for the US dollar, analysts said a near-term hike was already largely priced in.
Crude oil prices were also supported by news of increasing supply disruptions in the Middle East, ANZ said in a note on Monday.
That followed new doubts over Libya's attempts to revive its oil production after an armed faction entered two major oil ports on Friday, pushing back forces that captured and reopened the terminals in September.
“I'm surprised prices haven't moved higher given events in the Middle East over the weekend. China and US interest rates are the bigger issues,” Halley added.