Brent crude futures have steadied around $106 per barrel after China's total imports surged in March, suggesting that recovery in the world's number two oil consumer is gathering momentum.
Chinese imports grew 14.1 per cent in March, while exports climbed 10 per cent, relieving concerns over the subdued import growth of previous months. Crude imports slipped 2.1 per cent from a year ago, in line with market expectations.
"The trade numbers bode well for the global economy; the drop in crude imports doesn't really change the overall picture," said Tony Nunan, an oil risk manager at Mitsubishi Corp in Tokyo.
"The oil markets are struggling and looking for support, and this should keep them supported for now."
Geopolitical concerns also bolstered oil prices, especially simmering tensions in Iran and North Korea.
Front month Brent futures had slipped 20 cents to $106.03 per barrel by 6.55am Irish time, after posting their biggest gain since December in the previous session, helped by a weak dollar and tame Chinese inflation data.
US crude fell 43 cents to $93.87 per barrel after inventory data showed crude increased by a larger-than-expected 5.1 million barrels, compared with analyst expectations for a 1.5 million-barrel rise.
Economic signals
Some analysts said the accelerating restocking process in some industries and a favourable base effect from a year ago may have flattered China's March imports, which otherwise remain constrained by falling global commodity prices and a slower-than-expected upturn in investment demand.
Export growth in coming months may not be able to match the pace of January and February, even if the recovering global economy continues to bolster demand for goods from Chinese factories, they added.
The annual dip in crude imports didn't surprise the market as some state-run refineries started planned overhauls, and crude runs at independent refineries also declined on poor margins.
Chinese refineries processed close to 10 million bpd in the first two months of the year, a level just a touch off the record rate of 10.15 million bpd in December, as newly started refining facilities ran at high rates.
"We expect China's oil demand to go through a soft patch during this turnaround, before picking up again in the latter part of Q2," Sijin Cheng, an analyst at Barclays Capital, said in a report after the trade data was released.
The data mitigates some of the weak sentiment that has been plaguing markets since the US Labor Department said on Friday that employers added 88,000 jobs outside farming, less than half the analyst forecast of a 200,000 increase.
"Oil futures are under some downward pressure and some of the recent economic data, such as U.S. jobs, is indicating that the U.S. economic recovery is still slow," said Victor Shum, a senior partner at Purvin & Gertz in Singapore.
"Traders will continue to look for signals out of China to see if the growth momentum is intact."
One such signal came from China's inflation numbers yesterday, which showed a slower rate of price increase, allaying concerns of policy tightening that could derail growth in the short term.
Diplomatic worries over North Korea and Iran helped keep prices firm.
Tension in the Korean peninsula escalated after North Korea moved one long-range missile in readiness for a possible launch and South Korea said it had raised its surveillance.
Iran, which is engaged in a dispute with Western nations over its nuclear program, said it had begun operations at two uranium mines and a milling plant after weekend talks to resolve the dispute ended in stalemate.
