Oil prices fell around a dollar on Tuesday in a third day of declines as expectations mounted of a relatively swift restoration of supplies from OPEC member Libya.
Opposition forces still faced Libyan leader Muammar Gaddafi's better armed and organized troops, which on Tuesday reversed the rebels' western charge.
Traders and analysts also cautioned it could take time for significant volumes of Libyan crude make their way to international markets.
Brent crude futures for May delivery fell $1.10 to $113.70 a barrel by 1217 GMT, adding to two days of losses.
U.S. May crude futures dropped by $1.16 to $102.82 after falling the three previous sessions.
Rebels opposed to the rule of Muammar Gaddafi have regained control of oil ports and the United States on Monday said sales of Libyan crude from rebel-held territory would not be subject to sanctions.
The outcome of the looming battle for Sirte will affect how quickly oil exports from Libya come back online, said Eurasia Group analyst Cliff Kupchan said in a research note.
If the rebels take Sirte and move on Tripoli, the timetable could be somewhat expedited, though again full recovery would take a significant period of time.
The uncertainty could limit any sell-off, although thin volumes might exaggerate volatility.
Volume for U.S. crude fell on Monday to the lowest this year, with trade limited in part, analysts said, by concern about the prognosis for Japan, the world's third biggest oil user after the United States and China, following this month's earthquake and nuclear disaster.
To offset Libyan disruption, Saudi Arabia has increased output to around 9 million barrels per day (bpd), around one million bpd more than its OPEC target, which analysts have said has put a strain on its spare capacity.
As the kingdom scrambled to maintain its 12.5 million bpd oil capacity, specialist energy bank Simmons & Co said on Monday Saudi Arabia planned to expand its drilling rig count by 28 percent.
It's probably more bullish than bearish, said Amrita Sen, analyst at Barclays Capital. The flip side is there is less spare capacity.
Even though it has increased supplies, some of the extra Saudi oil has gone into stocks and the kingdom has repeatedly said the market is well-supplied.
Inventories in the United States have been particularly ample, which has helped to keep the price of U.S. crude around $10 below that of European Brent.
Ahead of weekly inventory data for release on Tuesday and Wednesday, a preliminary Reuters survey of analysts found crude oil stocks probably rose in the United States last week in line with seasonal trends.
Higher imports were expected to meet demand as refiners bring units back from maintenance, analysts said.
(Additional reporting by Florence Tan, Alejandro Barbajosa, Randy Fabi; editing by William Hardy)