Oil prices drop to $103 a barrel

Oil prices fell to near $103 a barrel Monday after surveys showed economic activity in China and Europe continues to contract. Meanwhile, a Dutch government crisis and French election results suggested waning support for austerity policies.

Benchmark oil for June delivery was down 75 cents to $103.13 a barrel by late morning European time in electronic trading on the New York Mercantile Exchange. The contract rose $1.16 to settle at $103.88 in New York on Friday.

Brent crude for June delivery was down 92 cents at $117.84 per barrel in London.

HSBC said Monday that its preliminary Purchasing Managers Index rose to 49.1 in April from 48.3 in March, suggesting a slowdown of Chinese growth may have bottomed out in the first quarter. However, it still showed a second month of contraction because a reading below 50 indicates a drop in industrial production.

In Europea, a survey of both the manufacturing and services sectors published by Markit fell to 47.4 points in April, compared with analysts' forecasts for a slight uptick to 49.3 from last month's 49.1.

Crude has slid from $110 last month amid investor worries that economic growth in the U.S. and China, the world's two largest oil consumers, may slow more than previously expected.

"The re-emergence of China and U.S. growth concerns, plus worries over Spanish sovereign debt, are undermining commodity prices," Barclays Capital said in a report. However, oil prices won't likely fall much "unless there is a major negative macro shock in the form of a deterioration in Europe or evidence of a hard landing in China, neither of which we think likely."

In Europe, the Dutch government was about to collapse after the failure of top-level talks on austerity measures. In France, Socialist Francois Hollande, a critic of austerity as a way out of the debt crisis, lead the first round of president elections over incumbent Nicolas Sarkozy.

Both developments suggest European politics may turn away from a focus on austerity cuts in favor of more growth-oriented policies.

Investors this week will also be closely watching the latest data from the U.S. about housing prices and consumer confidence for clues about the strength of the economy and crude demand. The Federal Reserve is scheduled to meet Tuesday and Wednesday to discuss the economy and monetary policy.

In other energy trading, heating oil was down 1.9 cents at $3.12 per gallon and gasoline futures fell 1.5 cent at $3.13 per gallon. Natural gas rose 0.5 of cent to $1.93 per 1,000 cubic feet.