Oil eased to $111 a barrel on Monday as some investors booked profits after last week's gains, although optimism that the world's biggest economies are on a steady recovery path limited the decline.

The crude market rallied last week after U.S. lawmakers reached a last-minute agreement to avert the so-called "fiscal cliff", or tax increases and spending cuts that would have threatened growth in the world's top oil consumer.

Brent crude fell 27 cents to $111.04 a barrel by 1013 GMT, after rising 0.6 percent last week. U.S. crude slipped 29 cents to $92.80 after adding 2.5 percent last week.

"There is a bit of pullback in oil prices after the rally last week. Oil futures had gained quite a bit last week," said Victor Shum, senior partner at IHS Purvin & Gertz in Singapore.

Reports on Friday showed U.S. employers kept up an even pace of hiring in December and the country's services sector expanded briskly. This, as well as earlier data showing expansion in U.S. and Chinese manufacturing, bolstered the outlook for oil demand.

This week's focus for financial markets will be on the European Central Bank. Investors are looking to the central bank's monthly meeting on Thursday to see if it hints at an interest rate cut early this year.

Figures on Monday showed euro zone factory prices fell for the first time in five months in November, pulled down by a slide in the cost of energy and giving the ECB room to consider another interest rate cut.

Investors will also be watching the U.S. Federal Reserve's stance on monetary easing, after top Fed officials and some U.S. economists suggested the central bank might halt its asset purchases this year.

Supply concerns arising from tension and fighting in the Middle East could support oil prices. The United Nations said last week more than 60,000 people have died in Syria's uprising and civil war. – Reuters