Oil fell more than $1 to stand near $88 a barrel on Tuesday, awaiting a clear signal from OPEC as a chorus of opinion within the exporting group spoke against an output increase.
U.S. crude was down $1.17 a barrel at $88.14 by 10:12 a.m. EST in volatile trading. It had hit a five-week low of $87.14 in the previous session.
London Brent crude, which settled on Monday at a premium to U.S. crude for the first time since August 23, fell 40 cents to $89.40.
U.S. weekly petroleum inventory figures, to be released by the Energy Information Administration (EIA) on Wednesday, were also expected to shape prices.
The market is idling at the moment waiting for a clear signal from OPEC and of course looking ahead to tomorrow's EIA data, said Simon Wardell, oil analyst with Global Insight in London.
OPEC's big Gulf producers have left open the option of a supply increase at Wednesday's meeting in Abu Dhabi, while insisting that supplies are sufficient to meet winter fuel demand and that high oil prices are driven by factors outside OPEC's control.
OPEC's decision could influence whether crude prices head back towards $100 a barrel or not.
Ministers and officials from Qatar, Venezuela, Iran and Libya have spoken against the need to pump more oil, while OPEC's core Gulf producers, led by Saudi Arabia, have avoided comment on whether the group might still opt for an output increase to rein in prices.
All options are open, Ali al-Naimi, the oil minister for OPEC's biggest producer Saudi Arabia and one of OPEC's most influential oil ministers told reporters on Tuesday.
Edward Meir, at MF Global, said: The decision will come down to the wire, and much will ride on where prices are on Wednesday and how strongly the Saudis will push for an increase.
FALLS FROM PEAK
Oil is down around 10 percent from its November 21 peak of $99.29 a barrel as worries that the weakening U.S. economy could cut into world energy demand have halted crude's rally.
Analysts said a U.S. intelligence report on Monday which stated Iran had put its nuclear weapons program on hold could ease some of the geopolitical risks in the market.
The fear of a unilateral strike on Iran has been an important component of the risk premium in crude oil and the... report should be seen as a significant flag for the reduction of the premium, said Olivier Jakob of Petromatrix.
The slump in prices and the dimming demand outlook has also made OPEC more reluctant to raise output.
Consuming nations have called on OPEC to put more oil on the market, to stem the decline in inventories ahead of the northern hemisphere winter and to temper prices.
U.S. Energy Secretary Sam Bodman called on OPEC to pump more oil despite the recent fall in prices to build global inventories, noting that prices were still very high.
Meanwhile, another poll of analysts by Reuters ahead of Wednesday's U.S. inventory data showed crude stockpiles probably fell 800,000 barrels in the week to November 30. Distillate stocks were seen down 300,000 barrels.
(Reporting by Santosh Menon, additional reporting by Luke Pachymuthu in Singapore, editing by James Jukwey)