Oil hovered just $3 short of last week's record high today, as traders eyed forecasts of a drawdown in US crude stocks and dollar movements ahead of the Federal Reserve interest rate decision.
US light crude for August delivery fell 19 cents to $136.81 a barrel by 0053 GMT. It rose as high as $138.75 yesterday, close to the record $139.89 hit on June 16. London Brent crude fell 14 cents to $136.32.
"There is the US inventory data and the U.S. Federal Reserve meeting later today. Those two will be on top of the oil market's agenda," said David Moore, a commodities analyst at the Commonwealth Bank of Australia in Sydney.
US crude oil inventories probably fell by 1.4 million barrels last week, extending a decline for the sixth time in a row as refinery utilisation rose, a poll of analysts showed.
The poll also called for a 200,000 barrel drop in gasoline supplies and a 1.9 million barrel increase in distillates stocks. The US Energy Information Administration will release inventory data for the week to June 20 at 1435 GMT.
A weak dollar, worries of further supply disruptions from Nigeria as well as simmering tensions between Iran and Israel also kept oil prices near record levels, analysts said.
In Nigeria, Royal Dutch Shell said it restarted production at its 220,000 barrels per day Bonga offshore field after an attack by militants last week.
A senior UN official appointed by Nigeria to help end unrest in the oil-producing Niger Delta said yesterday he would seek a 90-day truce with militants as a first step towards formal peace talks.
Meanwhile, senior oil workers held a limited strike held at Chevron offices on Monday. While the stoppage has not hit output, it has added to concerns about further disruptions in the Opec nation, where militant attacks shut 340,000 barrels per day (bpd) of production last week.
Tensions between Israel and Iran over Tehran's nuclear programme are also keeping supply jitters alive.