Oil prices were static on Monday in nervous dealings with traders awaiting a clear signal from the Opec producers' cartel on whether it would delay or implement a planned supply cut from April 1.
Rising tensions in the Middle East after the Israeli army killed the spiritual leader of the Hamas Islamic militant group, and renewed protests in Venezuela against President Hugo Chavez were also keeping oil bubbling at 13-month highs, analysts said.
US light crude for April delivery, which will expire from the board at the close of business on Monday, slipped nine cents to $37.99 a barrel.
The May contract on the New York Mercantile Exchange eased four cents to $37.58 a barrel.
"The Israeli attack may add 40 to 50 cents on a barrel later today, people will worry about a blow up in tensions between Israel and Arab nations," said David Thurtell, commodities strategist at Commonwealth Bank of Australia in Sydney.
The Israeli army confirmed it killed Hamas leader Sheikh Ahmed Yassin in a pre-dawn air strike in Gaza City, saying he was directly responsible for dozens of "terrorist attacks".
Palestinian Prime Minister Ahmed Qurie said the assassination "opens the door wide to chaos" and the Al-Aqsa Martyrs Brigades, a militant group in Palestinian President Yasser Arafat's Fatah, declared "war on sons of Zion", vowing a response "within hours".
Oil markets fear retaliatory attacks, especially in the Middle East, which hold two-thirds of world oil reserves.
The markets are already nervous about potential supply disruptions due to low levels of commercial oil stocks in major consuming nations such as the United States.
Tensions are also high in the fifth-biggest oil exporter, Venezuela, where thousands of opponents of Chavez marched at the weekend demanding a referendum on his rule. An opposition-led national strike last year almost halted Venezuelan oil sales.
At the same time, the Organisation of the Petroleum Exporting Countries is due to cut crude production by one million barrels per day from April 1 to avoid a supply glut in the second quarter when demand seasonally drops.
Opec ministers are due to review output policy on March 31, just ahead of the planned cut.
Comments by Opec ministers at the weekend gave little clue as to whether the group may reverse or delay the cut, given strong oil demand on the global economic recovery and red-hot oil prices, which closed at the highest level in 13 years last week.
Algerian Oil Minister Chakib Khelil said on Sunday world oil markets were not short of supply and Opec remained concerned about a seasonal drop in demand in the second quarter.
"The prices are too high, but not for lack of supply.
They're higher, we think, because of geopolitical uncertainties," Khelil told reporters on the sidelines of an energy conference in Doha.
"We're still concerned about a decrease in demand in Q2."
Ali al-Naimi, oil minister for Opec's leading producer Saudi Arabia, blamed high prices on speculators and low US gasoline stocks.
He said it was not clear if Opec would delay the cut. "I don't know. At the moment no one is in a position to say," Naimi told Italy's Il Sole 24 Ore in an interview.
In a research note, SG Securities said Opec risked losing credibility if it did not go through with the April reduction.
"Failing to confirm April's cut and to implement it would show Opec as unwilling to control the oil market or even incapable of doing so," SG said.
Commonwealth Bank's Thurtell said a delay or reversal of the cut would wipe "a couple of dollars" off a barrel of crude.
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