Brent crude fell towards $106.50 per barrel on Tuesday, dropping for a second straight session on disappointing manufacturing numbers from the world's biggest oil consuming nations, although supply concerns stemming from the Ukraine crisis checked losses.
Surveys showed manufacturing activity in the United States slowed in March after nearing a four-year high in February, while shrinking in China for a fifth month in a row.
The weaker-than-expected numbers from the top two economies muddied the outlook for crude demand, while worries of a build up in U.S. oil stocks also weighed on prices.
Brent crude eased 13 cents to $106.68 by 0515 GMT, from Monday's close of $106.81. U.S. crude slipped 3 cents to $99.57 a barrel, after ending slightly up at $99.60.
"The PMI flash figure is more significant," said Tan Chee Tat, investment analyst at Singapore's Phillip Futures.
The lower-than-forecast PMI figure "resulted in a swing in market sentiment to bearishness which weighed on oil prices", the analyst told Reuters on Tuesday.
Oil prices could come under further pressure if data shows a continued rise in U.S. stockpiles last week, which would be a tenth straight weekly gain. The U.S. Energy Information Administration (EIA) is scheduled to release its U.S. oil stocks inventory data on Wednesday.
In the week to March 14, U.S. crude stockpiles soared nearly 6 million barrels, more than double forecasts, as refinery utilization rates fell to the lowest levels in nearly a year, EIA data showed.
Investors are also keeping an eye on tensions in Ukraine and Russia, the world's biggest oil producer, for trading cues.
U.S. President Barack Obama and major industrialised allies warned Russia that it faced damaging economic sanctions if President Vladimir Putin takes further action to destabilise Ukraine following the seizure of Crimea.
In Libya, oil production will be cut by about 80,000 barrels per day to about 150,000 bpd on Tuesday after the El Feel oilfield was shut because the pipeline to Mellitah port was closed, state-run National Oil Corp said.