Oil held near $80 a barrel on Wednesday, with the market underpinned by expectations of tighter fuel inventories ahead of winter.
U.S. crude eased 5 cents to $80.21 a barrel by 10:34 a.m ET, after gaining more than $1.24 on Tuesday. London Brent crude shed 7 cents to $77.42.
Technical analysts, who follow past price trends as a guide to future moves, expect a further pullback.
Phil Roberts at Barclays Capital said although the big picture remained supportive for oil, near-term signs continued to warn of a correction.
The market bounced from its tipping point near $78.40 (on Tuesday), though downside risks have not been mitigated, he said.
Expectations of a tighter supply/demand balance ahead of winter is helping to keep oil near the record highs above $80 reached last month.
Europe's oil inventories declined in September, industry monitor Euroilstock said on Tuesday, while forecast of colder weather this year in the United States has led to expectations of higher demand for heating oil.
The tight balance is likely to persist in the near term, even embedding an increase in OPEC production, investment bank Goldman Sachs said in a note.
The Organization of the Petroleum Exporting Countries last month agreed a 500,000 barrel per day increase in production effective from November 1.
But Goldman Sachs predicted there were few signs yet of this increased output.
Little of this oil will likely arrive in consuming regions before the end of the year, the bank said. As a result, we expect a rare counter-seasonal drawdown in OECD oil inventories during 3Q 2007.
The bank predicted inventories could be at historically low levels by the end of the year.
Saudi Arabia, the world's top oil exporter, for example, will keep its crude oil supply steady to European customers in November versus October but is expected to boost shipments to Asia.
The kingdom has kept exports steady for months, with its production at around 8.6 million barrels per day.
U.S. weekly oil inventory, due out on Thursday, are expected to show a 900,000-barrel build in crude stocks, a 400,000-barrel draw in distillates -- including heating fuel -- and a 100,000-barrel increase in gasoline.
The weak dollar, which has helped drive oil higher, slipped again on Wednesday, pressured by expectations the U.S. Federal Reserve will have to cut interest rates again this year to help revive the U.S. economy.
The U.S. Energy Information Administration (EIA) said consumers in the world's top energy market will pay 10 percent more to warm their homes this winter than last year.
Government weather experts said this winter will be colder than last year's, but warmer than the norm.