US oil prices eased on Tuesday as the head of the Opec cartel said markets were well-supplied with crude and traders continued to take profits from this year's 40 percent rally.
US light crude for October delivery fell 68 cents a barrel to end at $43.31 on its first day of trade this week on the New York Mercantile Exchange. The NYMEX was closed on Monday for the long Labour Day weekend.
London Brent crude rose 14 cents to end at $40.76 a barrel, following a 61-cent drop on Monday.
Traders said higher production from the Organisation of Petroleum Exporting Countries is helping to ease concern about tight world supplies, especially in Iraq.
Opec President Purnomo Yusgiantoro said in Sydney that global markets had an oversupply of about 1.5 million barrels per day (bpd) of crude oil. Cartel ministers meet on September 15 to set supply policy for the fourth quarter.
"If you look at the supply and demand balance, the world has enough oil," Yusgiantoro told reporters at an industry conference. "Why is the price so high? It's the political premium."
Top world oil exporter, Saudi Arabia, is estimated to have pumped 9.5 million bpd in August, up 250,000 bpd from July.
The kingdom, which has pledged to supply customers with all the oil they want to stem this year's price rally, slashed prices for westbound October-loading crude in an effort to entice buyers to take the shipments.
"We're range-bound," said Refco analyst Marshall Steeves. "The market is discounting the latest problems in Iraq. The assumption is that oil will eventually come back."
But many analysts do not expect prices to fall far, as rapid world demand growth and tight spare production capacity magnify the impact of supply disruptions in Iraq.
Oil shipments along Iraq's northern pipeline to the Turkish port Ceyhan remained shut on Monday due to a sabotage attack last week. Repairs were expected to take at least a week.
A threat to US oil production in the Gulf of Mexico faded after Hurricane Frances fizzled out and Royal Dutch/Shell restored shut-in production.
But another storm, Hurricane Ivan, was headed across the Atlantic towards Barbados and the eastern islands in the Caribbean. Non-essential oil workers were evacuated from some oil and gas rigs off Trinidad and Tobago.
British oil major BP said it had cut crude oil production in waters of Trinidad from around 50,000 barrels per day to around 30,000 as Ivan neared. Venezuela said its oil exports were unaffected.
Demand for gasoline in top world consumer the United States is now passing its summer peak, and traders are switching their focus to consumption of heating fuels, which rises to a seasonal high during the northern hemisphere winter.
Last week, the US government said national crude stocks fall to the lowest level in five months, while distillate supplies, which include heating oil, rose two million barrels to stand at a 1.2 million barrel surplus versus a year ago.
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