Oil prices fell to near $75 a barrel on Friday after gaining about 5 percent this week as investors weighed prospects that the European debt crisis could slow fuel demand growth even in emerging markets such as China.
News that the world's no. 2 oil consumer China saw overall exports surge 48.5 percent last month helped boost prices in the previous session.
But data on Friday showed that China's industrial output slowed in May from April, reviving concerns that the economy could be overheating.
Most analysts are poised for a slowdown in the pace of fuel demand recovery in the euro zone, making the market increasingly reliant on China as the growth driver, while at the same time hindering its potential to play such a role.
U.S. crude for July fell 41 cents to $75.07 a barrel by 0951 GMT, despite an early rally in European equities.
ICE Brent rose 26 cents to $75.55 a barrel.
We are currently stabilizing toward the top end of the recent range but it seems to be having trouble getting higher than this, said Christopher Bellew of Bache Commodities.
Sentiment is still fairly fragile and people are worried about the depth of the European crisis.
At near $75 a barrel, oil prices are now in the middle of what Saudi Arabia's oil minister calls the ideal realm between $70-$80 a barrel.
Oil prices have risen for the past three sessions and are now around $10 above the low touched in May during the steep sell-off across the energy complex.
But prices are still nearly 15 percent below the 19-month high of $87.15 touched in early May.
Technical analysts expect oil U.S. crude prices to retrace to around $73.70 a barrel.
Sentiment was briefly lifted on Thursday after the International Energy Agency (IEA) revised up its 2010 demand growth forecast on better U.S. demand for diesel and ongoing strength in the Chinese economy.
The IEA is more optimistic than the other two main forecasters the Organization of the Petroleum Exporting Countries and the Energy Information Administration.
On the supply side, concerns about the impact of BP's Gulf of Mexico oil spill on future underwater oil development are also supporting oil prices, analysts said.
The IEA estimates that between 100,000 and 300,000 barrels per day (bpd) of new projects could be delayed by 2015 if there were an extended moratorium on new drilling.
The flow rate from the spill could be as high as 40,000 bpd -- twice as much as previously thought -- according to U.S. scientists.
Separately, OPEC member Nigeria's main militant group said its fighters clashed with soldiers in the creeks of the oil-producing Niger Delta on Thursday, but the military denied that any such shoot-out had taken place.
(Additional reporting by Alejandro Barbajosa in Singapore; Editing by Alison Birrane)