U.S. crude fell on Monday for a third day in the lowest trading volume of the year, as Libyan rebels regained key territory and redoubled efforts to resume oil exports from the OPEC country.

Oil seesawed during the day on a weakening U.S. dollar <.DXY> , upbeat U.S. pending home sales data, and growing speculation that the European Central Bank will raise interest rates as early as next month, which helped bolster the euro.

Brent crude futures for May delivery settled down 79 cents at $114.80 a barrel. U.S. May crude futures fell for a third day, losing $1.42 to $103.98.

Brent's premium to the U.S. benchmark increased by 40 cents to $10.82 a barrel, within a recently established range, after narrowing from a March 1 record above $17.

The most notable aspect of oil trade was its low volume, with uncertainty running high due to Middle East unrest, a nuclear crisis in quake-hit Japan, unsure economic prospects for the euro zone, and U.S. Federal Reserve officials debating quantitative easing policies.

Total U.S. crude volume was 58 percent below the 30-day average. At 348,370 lots traded by the end of regular NYMEX market hours, volume was on pace to be the lowest since December 31, according to Reuters data. Brent trading volume was 48 percent below the 30-day average.

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.


In OPEC producer Libya, rebels backed by Western air strikes advanced their position over the weekend, regaining control of key oil ports.

That could help slowly revive exports from the North African oil producer, whose oil shipments have been slashed to a fraction of their usual 1.5 million barrels a day.

A U.S. Treasury official said 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, agreed to help sell the Libyan crude.

Rebel leaders, oil traders and analysts said the developments raised the possibility of more oil exports, but warned they did not expect quick resumption of large volumes.

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 Matt Smith of Summit Energy in Louisville, Kentucky..

A lot of the workers that operate Libya's oil industry have left.

The United Arab Emirates said 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.

The U.S. National Association of Realtors said 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, Smith said.

Meanwhile, U.S. Federal Reserve officials are sending differing signals about whether the central bank should continue quantitative easing as U.S. consumer prices edge higher.

Atlanta Fed President Dennis Lockhart said the easing policy is appropriately calibrated to the state of the U.S. economy. Over the weekend, St. Louis Fed President James Bullard said policymakers should consider discontinuing quantitative easing.

(Additional reporting by Robert Gibbons in New York, Claire Milhench in London and Alejandro Barbajosa in Singapore; Editing by Marguerita Choy and David Gregorio)