Oil slipped below $62 today as mild weather in top consumer the United States pulled down heating oil demand.
The market found support from OPEC's decision to cut output and shipping delays on the US Gulf coast due to fog.
US crude was 33 cents lower at $61.88 a barrel earlier ahead of the January contract's expiry.
It fell $1.22 yesterday, the first drop in four sessions. London Brent was down 48 cents at $61.65.
The US National Weather Service forecast yesterday US heating demand would be around 25 per cent below normal this week as mild weather persists in Northeast and Midwest.
Support came from shipping problems on the Houston Ship Channel because of thick fog. Delays in shipments to the nation's busiest petrochemicals port led some refiners to warn of slower fuel production.
Distillate fuel stocks were also seen falling in tomorrow's government data, despite the mild weather.
Oil has found support in OPEC's decision last week to make a second output cut of 500,000 barrels per day (bpd) to start from February, on top of a 1.2 million bpd cut agreed from November.
"Recent inventory patterns suggest that markets would have moved into balance without OPEC help," said ABN AMRO analyst Geoff Pyne. "OPEC's November reduction should speed the process during December/January, but we think that compliance will weaken if stocks tighten substantially or prices rise above the mid $60s," OPEC is concerned about possible oversupply in the second quarter.
It said yesterday the fundamentals of the world oil market are likely to show signs of weakening in 2007 as economic growth slows and supply from non-OPEC countries rises rapidly.