Brent futures lost ground on Monday after a three-day rally last week as concerns of oversupply offset fears of unrest in the Middle East.
In addition, traders said investors had taken profit following gains last week driven by encouraging economic data from the US and China.
Oil prices sagged further below $112 per barrel with the International Energy Agency (IEA), which advises industrial nations on energy policy, saying the market is tighter than expected. However, it was too early to declare a return to the bull market, it said.
Analysts seemed to agree more with an assessment by the Organisation of the Petroleum Exporting Countries (OPEC) that supply had become greater than demand.
“The IEA may have said the market is tighter, but the over-riding fundamental feeling in the market is that crude oil is over supplied in 2013,” said Tony Nunan, an oil risk manager at Mitsubishi in Tokyo.
Front-month Brent slipped 32 cents to $111.57 per barrel by 0706 GMT. US crude shed 46 cents to $95.10 per barrel after touching a four-month high last week.
Prices were also given support last week by the seizure by radical Islamists of a gas plant in the Algerian desert.
Algeria is a member of the Organisation of Petroleum Exporting Countries (OPEC) and there were fears of supply disruptions. But the crisis came to a bloody end at the weekend in a showdown between the extremists and Algerian troops.
The latest news on Algeria’s hostage crisis is that the fate of “fewer than 10” British nationals caught up in the Algerian hostage crisis remains unknown as the four-day stand-off in the desert came to a bloody climax.
Foreign Secretary William Hague said that while the large majority of Britons at the BP gas plant at In Amenas were now safe, the country needed to be prepared for more “bad news”.
“As of now there are fewer than 10 British nationals at risk or unaccounted for. But that of course means that we continue to prepare ourselves bad news,” he said.
The Algerian state news agency, APS, reported that seven hostages died as Algerian special forces mounted a “final assault” on the last terrorists holding out at the sprawling gas facility.
