Brent was flat and U.S. oil pared losses on Monday in the weakest trading volume this year, with traders awaiting further evidence that Libya could resume crippled oil exports after rebels regained key territory.
A weaker U.S. dollar and upbeat U.S. pending home sales pulled oil prices back from earlier losses. Growing speculation that the European Central Bank will raise interest rates as early as next month supported the euro.
Brent crude futures for May delivery traded unchanged at $115.59 a barrel by 1:46 p.m. EDT (1746 GMT), after bouncing off an earlier $114.55 low.
U.S. May crude futures fell for a third day, losing 63 cents to $104.77 a barrel, after dipping as low as $103.60. Brent's premium to the U.S. benchmark rose 43 cents to $10.85 a barrel, staking out a range after narrowing from its March 1 record above $17.
But with uncertainty running high amid Middle East unrest, a nuclear crisis in quake-hit Japan and unsure economic prospects for a debt-laden euro zone, the most notable aspect of Monday's oil trade was paltry volume.
With only a half-hour of regular trade to go, total U.S. crude volume was tracking two-thirds below the 30-day average and headed for the lightest volume of the year. Brent trading volume was 55 percent below the 30-day average, according to Reuters data.
The low trading volumes have continued from last week with a high level of indecision in oil markets, said John Kilduff of New York hedge fund Again Capital.
Uncertainty about supplies from the Middle East is counterbalanced with the potential for demand destruction in Japan following the earthquake. The big momentum players are getting sidelined.
ECONOMIC DATA, LIBYAN REBELS
The U.S. National Association of Realtors said on Monday its Pending Home Sales Index, based on contracts signed in February, unexpectedly rose 2.1 percent, potentially boosting the outlook a U.S. economic recovery.
But Japan's woes and Europe's murky economic outlook have dampened bullishness about growth in oil demand.
Europe remains a concern with Portugal, Ireland and Greece all contributing to a negative economic picture, said Matt Simmons at Summit Energy in Louisville, Kentucky.
In OPEC producer Libya, rebels backed by Western air strikes advanced their position over the weekend, regaining control of key oil ports.
A U.S. Treasury official said that rebels could sell Libyan crude free from sanctions imposed against transactions with the government of Colonel Muammar Gaddafi.
Middle East Gulf country Qatar, which has backed the Libyan rebels, has agreed to help them sell Libyan crude. But rebel leaders, oil traders and analysts say those developments probably won't lead to a quick resumption of oil shipments from Libya, which have plunged to a fraction of their normal 1.5 million barrels a day.
Ongoing fighting and concerns over U.S. and United Nations sanctions are likely to keep crimping Libya's output, they said.
Qatar's help and rebel gains in theory could quicken Libya's efforts to resume oil shipments, but there are still a lot of logistics problems, said Smith.
A lot of the workers that operate Libya's oil industry have left.
The United Arab Emirates said Monday it has stepped in to help make up for lost output from Libya, and acknowledged that other OPEC producers have done the same by unilaterally boosting output, including Saudi Arabia, Kuwait and Angola.
(Additional reporting by Robert Gibbons in New York, Claire Milhench in London and Alejandro Barbajosa in Singapore; Editing by Marguerita Choy and David Gregorio)