LONDON (Reuters) - Oil prices held steady above $119 per barrel on Monday as the prospect of a third round of liquidity stimulus by the United States and a weaker dollar continued to support commodities despite slower economic growth around the globe.
Brent June crude futures were down 48 cents to $119.35 a barrel by 5:01 a.m. EDT (0921) GMT, on track to close down for the second consecutive month. U.S. crude was down 35 cents at $104.58 a barrel.
Analysts said the market was effectively trading sideways following data on Friday which showed slower-than-expected U.S. GDP growth in the first quarter, raising hopes of a fresh liquidity injection.
"There are two factors at play that are preventing another sharp drop at the moment - the weaker U.S. dollar and the expectation that the Fed will come up another round of quantitative easing," said Carsten Fritsch, an energy analyst at Commerzbank in Frankfurt. "That is supporting commodity prices."
The dollar hit a two-month low against a basket of currencies .DXY on Monday. A weaker dollar makes commodities priced in dollars more affordable for buyers using other currencies.
The dollar is likely to come under more pressure if this week's data, including the key U.S. jobs numbers, disappoints.
"If growth in the U.S. is going to be weaker than the Fed and the market expect, then the Fed will have to act," said Jeremy Friesen, a commodities strategist at Societe Generale.
In Europe, data showed that Spain's economy had slipped into recession in the first quarter as domestic demand shrank against a background of deep government spending cuts.
Although GDP declined 0.3 percent quarter-on-quarter and 0.4 percent year-on-year, this was not as bad as analysts had forecast. "The Spanish GDP number, which could have been depressing came in a bit above expectations but not much," said Filip Petersson, commodity strategist at SEB.
Trading volumes are expected to be fairly light today because of the May Day bank holiday across much of Europe on Tuesday. Analysts expressed surprise at how well oil was holding up given the bearish newsflow of the past few weeks.
"We saw some decline last week to about $117 in Brent but now we are back at around $120," said Commerzbank's Fritsch.
"This is despite the fact that tensions with Iran have eased which should reduce the risk premium, and there are signs that growth momentum is slowing in the two-largest oil consuming nations, the United States and China."
SEB's Petersson said equity markets had run a bit ahead of crude, which could be providing some support. But he added that the oil supply factor should continue to weigh, with over-production from Saudi Arabia.
"There is an Armada of tankers heading towards Asia from the Middle East so there's a general feeling of over-supply in the market," he said.
Speculator positioning in U.S. crude oil futures and options was mixed in the week to April 24, CFTC data showed on Friday, with traders cutting their positions on the New York Mercantile Exchange (NYMEX) but raising them in London.
Investors will scour data on Chinese PMI on Tuesday and U.S. employment on Friday for a better read on the economic health of the world's two largest oil consumers.
"Maybe the Chicago PMI data could do something later today but I think the most interesting thing coming up now is the Chinese PMI tomorrow," said Petersson.
Chicago April PMI data, due out at 1345 GMT, is forecast to ease back to 60.5 in April, from 62.2 last month.
Additional reporting by Florence Tan in Singapore; Editing by Alison Birrane