Oil prices edged lower, after rallying 5 pct this week, as market attention turned to the latest US inventory report, expected to show further builds in already ample crude supplies.
However, falls were limited by concerns gasoline supplies drew again last week and that they may become stretched ahead of the peak demand summer driving season, analysts said.
At 11.17 am, April-dated Brent contracts were down 34 cents at 63.63 usd, after soaring 1.77 dollars to close at 63.97 usd yesterday. Meanwhile, April-dated US light crude futures were down 42 cents at 62.69 usd.
Oil prices have gained almost 4 usd this week on concerns the US Energy Department's new greener fuels regulations requiring a phase out of the gasoline additive MTBE will lead to supply tightness in the summer.
The concerns have been exacerbated by a heavier-than-normal refinery maintenance season, strong gasoline demand in the US and gasoline supplies which, while healthy, are currently below year-ago levels.
Nordea Bank analyst Anette Einarsen said the market was in a consolidation phase this morning, with many traders closing out their positions following yesterday's gains and ahead of the inventory data. The data is scheduled for release at 3.30 pm.
It is expected to show US crude inventories, already at 7 year highs, gained a further 2.7 mln barrels last week while gasoline supplies lost another 1.3 mln barrels. Distillates are seen falling 1.7 mln barrels. Aside from the data, Einarsen said fears Iran may use oil as a political weapon in its nuclear dispute with the West were limiting the downward move in prices.
The UN Security Council agreed yesterday to hold a meeting on the Iranian nuclear crisis Friday amid continuing wrangling over a draft statement urging Tehran to suspend uranium enrichment.
Western countries fear Iran's uranium enrichment work could be diverted into weapons production, although Iran insists its nuclear programme is solely aimed at generating electricity.
Iran's supreme leader Ayatollah Ali Khamenei issued a tough line yesterday on the nuclear programme, saying it is irreversible, although his officials were at the same time meeting with Russia to try to find a diplomatic solution.
Separately, concerns remain over lost supply from Nigeria after the African country said yesterday it was losing more output to militant attacks than previously thought.
The OPEC member said it shut down a total of 556,000 bpd of crude production, revising up the output affected by some 100,000 bpd.
But Dariusz Kowalczyk, a senior investment strategist with CFC Seymour said the geo-political risk premium is already fully priced in at yesterday's closing levels.
"So unless there are any more updates in the Iran or Nigeria situations, I do not expect anymore upside today," he said.