* FTSEurofirst 300 index up 0.2 pct
* Frankfurt shares outperform
* Greece in focus as cash crunch looms (Adds detail)
By Atul Prakash and Lionel Laurent
LONDON, May 18 (Reuters) - European shares steadied on Monday as investors grew more optmistic over a deal over Greek debt, although energy earnings and looming share sales in the banking sector weighed on investor appetite.
The pan-European FTSEurofirst 300 index was up 0.2 percent at 1,575.95 points by 1435 GMT, although most national benchmark indexes were in negative territory.
A recent rollercoaster sell-off in the bond market has taken some of the wind out of European stock-market sails, with top shares down nearly 5 percent from April peaks.
Shares in Austrian energy group OMV sank nearly 9 percent after it reported a halving of headline profit as low oil prices weighed on its upstream business. It also said it was unlikely to resume production in Libya or Yemen before winter.
Greek shares recovered after an early fall, with the top share index closing 1.6 percent higher. The EU said that Greece was being "more constructive" in talks, although it denied a report cited by traders that the EU Commission was preparing to compromise over a Greek debt deal.
"'Grexit' is still a low probability this year, in our view... But volatility could increase as bailout talks continue and the cash shortage grows more acute," RBS analysts wrote in a note to clients.
The financials sector was particularly volatile, with Monte dei Paschi down more than 3 percent before a plan to sell new shares starting next week. Societe Generale and Credit Agricole were down 2 to 3 percent.
Nomura analyst Jon Peace on Monday downgraded Credit Agricole to "neutral" on valuation grounds but kept SocGen on a list of banking stocks to buy.
Germany's DAX index outperformed, however, helped by a 3 percent-rise in Volkswagen shares after analysts at Deutsche Bank hiked the target price to 280 euros from 230, citing efficiency gains at the company.
Shares in BHP Billiton were around 2.6 percent higher, having opened sharply lower after spun-off unit South32 started trading with a market value of nearly $9 billion, a third below the top end of forecasts. Analysts said this underlined investor nerves about the outlook for the battered mining sector. (Additional reporting by Alexandre Boksenbaum-Granier; Editing by Louise Ireland)