Oil dipped towards $82 a barrel on Thursday after a two-day rally, reacting to the dollar strengthening against the euro and a lack of strong steps from OPEC to tighten supplies above its official output cap.
U.S. crude oil futures fell 59 cents to $82.34 a barrel by 1225 GMT, having briefly slipped below $82. ICE Brent crude was 62 cents down at $81.34.
Prices rose more than $3 in the previous two days due to larger than expected decreases in fuel inventories in the United States and strong U.S. gasoline demand, which rose to a record high for the month of February.
Analysts said some technical indicators, or studies mainly based on the patterns of past price movements, have prompted investors to lock in profits at current price levels for the short term while longer-term pressure came from low compliance to OPEC's pledged output ceiling by its member countries.
"The market right now is very technical. For now, it is a technical retreat," Olivier Jakob with Petromatrix said.
"OPEC yesterday did not actually make a strong statement about the low level of compliance, which may make the compliance level even lower. It will continue to supply lots of oil to the market."
Ministers from the Organisation of Petroleum Exporting Countries (OPEC) agreed on Wednesday to maintain the official existing cuts of 4.2 million barrels per day. But many of them have already been pumping oil exceeding their output caps.
OPEC's Secretary General said the group did not push member countries about the compliance too much at the meeting and the oil minister of Saudi Arabia, its largest producer, said he was "very happy" with "beautiful prices."
The group is even likely to continue to leave its oil output quotas unchanged at its next meeting in October, Kuwaiti Oil Minister Sheikh Ahmad al-Abdullah al-Sabah told Reuters on Thursday.
On the foreign exchange market, the dollar gained against the euro as the single currency was hit by a report saying Greece is not hopeful of receiving aid from euro zone members, adding to uncertainty over a resolution to its debt problems.
The stronger dollar diminishes the purchasing power of other currencies, often leading dollar denominated oil and commodities prices lower.
European shares slipped back from the previous session's 17 months closing highs.
