Oil slipped below $82 on Friday, but was still close to record highs because of concerns over supply disruptions from a storm in the Gulf of Mexico.
U.S. crude for November delivery fell 10 cents to $81.68 a barrel by 11:31 a.m. EDT. The October U.S. crude oil contract expired on Thursday after it hit a record for the seventh straight session at $84.10.
London Brent crude was 25 cents up at $79.34.
Oil has traded above $80 for the past week, boosted by a string of bullish factors including falling crude stocks in the United States, the threat of hurricane damage to oil facilities in the Gulf of Mexico and a weak dollar.
Energy companies have shut close to a third of U.S. oil output in the Gulf of Mexico as a precaution against a tropical disturbance becoming a storm as it enters the region.
A cluster of squalls and gusty winds in the northeast Gulf of Mexico could blow up into a tropical storm as it moves towards the coast of eastern Louisiana and western Florida.
The Gulf shutdowns, a drop in crude oil stocks in top consumer the United States for the fourth week in a row plus speculative inflows have helped accelerate oil's ascent.
And an aggressive 1/2 percentage point cut in interest rates this week by the U.S. Federal Reserve to boost the ailing U.S. economy has eased fears of a U.S. slowdown that could hurt oil demand.
The U.S. rate cut has also boosted other commodity prices.
Copper climbed to 8-week highs on Friday, while gold reached a 28-year peak, benefiting from the dollar's slide to record lows versus the euro.
Although the macro-economic environment remains uncertain, forward looking market balances look extremely tight especially for oil and base metals, Barclays Capital said in a research note.
Other analysts said oil's relentless rise had made it vulnerable to a sharp fall.
It seems clear to us that fear is overriding fundamentals, thus feeding the upward frenzy, said Edward Meir at MF Global. However, such a market mindset is not sustainable, and could trigger a rather severe correction once the music stops.
OPEC has agreed to a 500,000 barrels per day increase in output from November 1, but analysts say this is too little to calm fears that oil inventories will tighten during the peak winter demand season.
Iran's OPEC governor said the jump in oil prices, which have climbed a third this year and quadrupled since 2002, was not sustainable.
Hossein Kazempour Ardebili told state radio crude prices had risen on the back of a range of factors, such as geopolitical issues and turmoil in financial markets, and added that this situation is not stable and cannot be permanent.