Oil prices diverged on Monday after spiking early on in reaction to a weaker dollar and signs of improved Chinese demand for crude, analysts said.

New York's main contract, light sweet crude for delivery in May, fell 32 cents to 84.60 dollars a barrel after rallying above 85 dollars early on Monday.

Brent North Sea crude for May was up 12 cents to 84.95 dollars a barrel in afternoon London trading.

Explaining the reason behind Monday's initial spike in prices, Commonwealth Bank of Australia analyst David Moore said: "The euro has risen against the US dollar … and the Chinese trade data gave markets a more positive view on oil demand."

A weaker US currency tends to benefit dollar-priced oil because it becomes cheaper for buyers using stronger currencies, and therefore stimulates demand and prices.

The euro surged against the dollar and yen on Monday after the 16 nations using the single currency unveiled a 30-billion-euro lifeline for debt-hit Greece.

Oil prices meanwhile also received a boost from a report on Saturday showing that oil imports grew in China, the world's second-largest energy consumer, by 29 percent in March compared with a year earlier.

China imported 4.98 million barrels a day, according to preliminary data from the General Administration of Customs, while net imports were 20.8 million metric tonnes.

"Oil prices are buoyed by the strength in Chinese" data, said Barclays Capital analyst Amrita Sen.

"We expect Chinese oil demand growth to be the greatest contributor to global oil demand growth this year at 0.62 million barrels a day, just shy of the 0.9 mb/d year-on-year growth achieved at the peak of the Chinese oil demand shock in 2004," said Sen.

Oil prices had risen to 18-month highs last week after climbing above 87 dollars a barrel as investors bet on better demand prospects amid signs of a strengthening economic recovery.

But on Thursday and Friday, the market pared its gains, as traders fretted over Greece and a disappointing US jobs report that reminded investors of the rocky road to economic recovery.

The US Department of Labor said new claims for unemployment insurance benefits rose by 18,000 to 460,000 in the week ending April 3. The rise surprised most analysts who had expected new claims to fall to 435,000.

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