Oil prices slipped on Tuesday, with Brent crude falling below $115, as investors betting oil prices would rise with western involvement in Libya's civil war took profits in anticipation of a slowdown in air strikes.
Anti-aircraft fire rang out across Tripoli for a third night on Monday, but strikes are likely to become less frequent, a U.S. general said, as Washington holds back from being sucked into the Libyan civil war.
Despite the slight pullback, oil prices remained strong, driven by tensions in the Middle East, against the last peak near $120.
Front month Brent crude was 27 cents lower at $114.69 at 0946 GMT, around $5 below a two and a half year high near $120 hit last month.
U.S. crude for May, the most liquid contract before the expiry of April later on Tuesday, shed 20 cents to $102.89.
Oil had gained around 1 percent on Monday, the first day of trading after U.N.-backed western powers kicked off the military campaign in Libya, but analysts said much of the Libyan supply disruption has now been priced into the market.
Short-term, we suspect that the crude oil market is somewhat overextended here, as the fighting in Libya will lose its ability to spark the market higher, said Edward Meir, senior commodities analyst at MF Global.
For all practical purposes, investors have reconciled themselves with the fact not much oil will be flowing out of Libya anytime soon.
Violent political unrest has reached countries bordering OPEC king-pin Saudi Arabia, the world's largest oil exporter and only swing state with enough spare capacity to plug serious production shortfalls elsewhere.
In Yemen, top generals, ambassadors and some tribes threw their support behind anti-government protesters in a major blow to President Ali Abdullah Saleh's efforts to ride out demands for his immediate exit.
Unrest spread in southern Syria with hundreds of people demonstrating against the government in three towns near the main city of Deraa, although authorities did not use force to quell the latest protests.
Prices have seesawed over the past week as concerns over Western military intervention in Libya offset the risk aversion that swept global financial markets after Japan's worst earthquake on record, tsunami and resulting nuclear crisis.
Smoke and steam rose from two of the most threatening reactors at the crippled Fukushima nuclear plant on Tuesday, suggesting the battle to avert a disastrous meltdown and stop the spread of radiation was far from over.
But oil prices gained support as the market realized hydrocarbons will have to compensate for Japan's loss of nuclear generation capacity.
The market has recovered very much after the Japan crisis, and for investors who had long positions at the period of declining market, it's good for them to take profit now, said Ken Hasegawa, commodity derivatives manager at Japan's Newedge brokerage.
Aalysts expect weekly reports on U.S. oil inventories will show gasoline and distillate stockpiles fell last week, which should support product values.
Industry group the American Petroleum Institute will publish inventory statistics for the week ended March 18 on Tuesday, followed by U.S. government data from the Energy Information Administration on Wednesday.
(Additional reporting by Alejandro Barbajosa, editing by William Hardy)