The weak US dollar helped oil rise above $99 a barrel on Monday, closing in on $100 milestone, but it then retreated from session highs on expectations that an OPEC meeting next week could mean a supply increase.
Iran's Oil Minister Gholamhossein Nozari said at the weekend that some OPEC members were advocating an increase in production when they meet in Abu Dhabi on December 5 to debate whether to raise output for a second time this year.
US light, sweet crude for January delivery stood 16 cents higher at $98.34 by 12:15am, within striking distance of the all-time high of $99.29 from last Wednesday.
London Brent crude was 10 cents up at $95.86 a barrel after reaching a new record high of $96.56 earlier in the session.
Oil has risen more than 40 per cent since August, boosted by a decline in the US dollar to a series of record lows versus the euro that has spurred buying of oil, gold and other commodities.
The onset of colder weather in the US Northeast, a major consumer of heating oil for household use, has contributed to the upswing in prices as traders bet higher winter demand will strain inventories that are lower than normal.
Temperatures in the region today were near their norms for this time of year, according to The Weather Channel Web site (www.weather.com), but the US National Weather Center's six to 10-day outlook calls for colder-than-usual conditions.
The Organization of the Petroleum Exporting Countriess agreed in September to raised output by 500,000 barrel per day (bpd), but this has so far failed to stem oil's advance.
Iranian minister Nozari said opinion among OPEC ministers regarding an output boost was divided. "Some countries agree with output increase and others believe there is a good balance between oil supply and demand," he told a news conference.
Most members have said publicly that they don't believe more oil is needed, or that an increase would not cool prices.
The United States has urged OPEC to boost production because of shrinking oil inventory levels in developed economies and to help bring down prices that have surged to record levels.