Brent oil held near $104 per barrel on Tuesday, as worries about demand outlook were offset by expectations the U.S. Federal Reserve and European Central Bank may do more to stimulate the global economy.

Brent rose 3 cents to $103.84 a barrel by 1120 GMT, after earlier touching a low of $103.41. U.S. crude was 17 cents lower at $94.33 a barrel, on track to end the month down nearly 3 percent.

Oil has fallen 5.7 percent in April, heading for its biggest fall since last May as weak economic data darkened the demand outlook.

Underlining the difficulties facing the European economy, euro zone unemployment for June rose to 12.1 percent for March, while German retail sales fell for the second month running in March, confounding forecasts of a rise.

Spain's economy shrank for the seventh straight quarter from January to March, preliminary data showed on Tuesday, and the recession looks set to last into next year.

"In the last couple of weeks economic data all over the world has capped the upside, and until data shows a strong rebound, there's little chance for a bounce back," said Andy Sommer, analyst at EGL in Dietikon, Switzerland.

Japan's crude oil imports from Iran rose 4.5 percent in March from a year ago, the same month that the world's third-largest oil importer won its third consecutive waiver from U.S. sanctions on Tehran for reducing shipments from the country.

Sommer said rising imports of Iranian oil by Japan indicated that there would be less demand on oil from other regions, helping to keep supply ample.

"The presumption for tighter supply (because of sanctions in Iran) is not so valid and that will limit the upside for prices," Sommer said.

STIMULUS AWAITED

However, fears that economic recovery could be running out of steam have prompted growing confidence that the ECB and Federal Reserve could extend monetary measures to stimulate economic growth.

"The market believes there will be some more quantitative easing, and that should be supportive," said Bjarne Schieldrop at SEB in Oslo.

The U.S. Federal Reserve kicks off a two-day meeting later in the day and traders are waiting to see if a sluggish economic recovery and a slowdown in inflation could not only end talk of tapering bond buying but actually push the central bank into buying more.

The Fed is currently buying $85 billion of debt a month and the talk had been of when it might start to scale back. However, recent string of soft data have changed the conversation.

Inflation in the euro zone has fallen to a three-year low and unemployment is at a new record, data showed on Tuesday, raising expectations of an interest rate cut by the European Central Bank to reignite the stagnant economy.

Traders will also closely watch this week's data from China, the world's No.2 oil consumer, that may show factory activity in April expanded at its fastest pace in 12 months.

The earlier private sector survey of purchasing managers, sponsored by HSBC, showed activity in China's industrial sector dipped in April as new export orders shrank.

"With China, we know growth has slowed, but I keep saying that a 7 to 8 percent growth looks so much better than a recession," Carl Larry, president of the Houston-based Oil Outlook and Options said. – Reuters