Oil steadied above $76 a barrel on Tuesday, rebounding from an earlier drop as concerns over supply and speculative buying lent support.
London Brent crude for September delivery, the new front-month, was up 8 cents at $76.37 a barrel by 1302 GMT, up from a low of $75.48. Prior to its expiry on Monday, the August contract rose to $78.40 -- just shy of Brent's record $78.65.
U.S. crude was up 58 cents at $74.73, narrowing the spread with Brent, a day ahead of key U.S. oil inventory data.
Despite yesterday's pull back prices remain very well supported, helped by tightening fundamentals and strong market sentiment, Barclays Capital said in a report.
Oil has rallied from around $50 in January, stoked higher by supply problems in the North Sea and a wave of fund buying.
A series of refinery problems in the United States has also kept markets on edge during the peak driving season, but some plants are restarting and cranking out more fuel.
Gasoline stocks in the world's biggest consumer are expected to have risen by 900,000 barrels last week while a 1.1 million barrel rise in distillate inventories is anticipated, according to a preliminary Reuters poll.
Some analysts said an increase in fuel supplies may do little to dampen oil's rally.
Prices do seem high even given the fundamentals, which are unquestionably a little tight, but I wouldn't want to bet against the price going much higher, said Simon Wardell of Global Insight.
There just seems to be a mood out there to push the $80 mark and that might be tested if there's any sort of encouragement in the EIA data.
Speculative investors have aided the price run-up by pushing cash into commodities amid concerns world demand growth will continue to stretch supplies.
The expectation of higher prices is causing the money to flow in, said Bob Greer of commodity investor PIMCO.
Goldman Sachs said on Monday oil could reach $90 a barrel this autumn and $95 by the end of this year if OPEC did not relent on its export curbs and pump more crude.
But Iran, OPEC's second biggest producer, repeated on Tuesday there was no need to pump more or for member states to gather ahead of the group's scheduled September meeting.
(Additional reporting by Jane Merriman in London and Maryelle Demongeot in Singapore)