By Robert Gibbons
NEW YORK (Reuters) - Crude futures edged up but relinquished early gains and briefly turned lower in choppy trading on Monday as a global supply glut continues to cap gains and traders took profits after oil's earlier push higher.
Prices rose initially on concerns about turmoil in Yemen, expectations for no quick return to the market of Iranian barrels if a deal is reached on Tehran's nuclear program and the slowdown in U.S. drilling.
Weak export data from China raised concerns about the economy of the world's No. 2 oil consumer but also fueled hopes for economic stimulus along with data that showed China's crude oil imports were up 14 percent in March versus a year ago, though imports fell from February.
"Another case of bad news possibly being good news, since more stimulus for China would lead to more demand," said Phil Flynn, analyst at Price Futures Group in Chicago.
U.S. May ULSD
Brent May crude
U.S. crude
The market opened for Monday trading with momentum from Friday's strong finish on news that the number of U.S. rigs drilling for oil fell by 42 last week to 760, the largest decline in a month.
Adding support was news that speculators in Brent futures and options raised net long positions to the highest level since July 2014, in the week to April 7, data from InterContinental Exchange showed on Monday.
This followed Friday's news of a big jump in net long positions of U.S. crude futures and options in the same period.
But analysts at Germany's Commerzbank (XETRA:CBKG) were unconvinced by the investors' bets.
"We believe the optimism among investors vis-à-vis oil is exaggerated," they said in a note on Monday.
"This has given rise to considerable correction potential which could lead at any time to a sharp fall in prices."