LONDON: Oil prices fell on Monday, snapping four days of gains as worries over supplies from the Middle East eased and investors focused on the health of the global economy and fuel demand.
Tension between Iran and the West over Tehran's nuclear programme has raised fears of a disruption to oil supplies from the Mideast Gulf but high-level talks are due to start soon, calming fears of an immediate crisis.
European economies are either contracting or stalled and there are increasing doubts whether the US Federal Reserve will maintain its loose monetary policy, a major support for growth.
Brent crude oil futures for April fell 55 cents to $125.43 a barrel by 0923 GMT while US crude was down 55 cents at $106.85.
"With less emphasis on Iran and the Middle East, the focus is shifting back on to the fundamentals of oil supply and demand," said Carsten Fritsch, commodity analyst at Commerzbank in Frankfurt.
China posted its largest trade deficit in at least a decade over the weekend, fanning concerns of lower fuel demand in the world's second largest economy.
While the deficit raised questions over the global economy's appetite for its goods, China's crude imports and implied oil demand reached record levels in February.
NET LONGS CUT
Speculators cut their net long positions in US crude oil futures and options positions in the week to March 6 for the first time in five weeks as prices fell, data from the US Commodity Futures Trading Commission (CFTC) showed on Friday.
Brent rose 1.88 percent last week in its sixth weekly rise in seven, after Greece averted an immediate default while US employment data improved, strengthening prospects of better fuel demand in the world's largest oil user.
"Western Europe seems to be swinging into a positive trend, with Greek austerity measures in place and the largest sovereign debt swap in history being all but finalised," Stephen Schork, editor of the Schork Report in Villanova, Pennsylvania.
He said the Brent-WTI spread may test the 2012 low of minus $20.70 a barrel if the market sees encouraging data this week from Germany's economic sentiment survey and UK jobless claims this week.
Investors are still spooked by supply concerns stemming from Iran's dispute with the West over its nuclear programme, on top of lower output from Syria, South Sudan and Yemen.
The chairman of the US Senate Armed Services Committee said on Friday that an international naval blockade of Iranian oil exports should be considered before any resort to air strikes against the country's disputed nuclear programme.
OPEC pumped the most oil in more than three years in February but oil prices have surged more than 8 percent this year, raising concerns that expensive oil could hurt global economic growth.
Kuwait's oil minister expressed similar worries on Sunday, saying that current world oil prices are not justified.