Oil prices fell on May 1 as jitters over the prospect of the U.S. Federal Reserve raising interest rates combined with weaker Chinese manufacturing data to erase earlier gains.

Brent futures for July delivery were down 55 cents, or 0.7%, at $79.78 a barrel at 0009 GMT, while U.S. West Texas Intermediate (WTI) crude lost 54 cents, also a 0.7% drop, to trade at $76.23.

U.S. consumer spending was flat in March as an increase in outlays on services was offset by a decline in goods, but persistent strength in underlying inflation pressures could see the Federal Reserve raising interest rates again.

"A hawkish tone from the Fed could put pressure on energy and metals," ANZ Research said in a client note.

U.S. economic growth slowed more than expected in the first quarter. An acceleration in consumer spending was offset by businesses liquidating inventories in anticipation of weaker demand later this year amid higher borrowing costs.

Meanwhile China's manufacturing purchasing managers' index (PMI) declined to 49.2 from 51.9 in March, official data showed on Sunday, slipping below the 50-point mark that separates expansion and contraction in activity on a monthly basis.

"Investors remain cautious amid mixed economic signals. Brent crude has been tracking broader markets in recent sessions, with a slew of economic data creating more uncertainty about the outlook," ANZ's note said.

On Friday, oil prices mostly rose over 2% after energy firms posted positive earnings, and U.S. data showed crude output was declining while fuel demand was growing.

U.S. crude production fell in February to 12.5 million barrels per day (MMbbl/d), its lowest since December. Fuel demand rose to nearly 20 MMbbl/d, its highest since November, according to the Energy Information Administration (EIA).

EIA data last week showed U.S. crude oil and gasoline inventories fell more than expected as demand for the motor fuel picked up ahead of the peak summer driving season.