Oil prices fell from a record peak on Tuesday as dealers took profits, but tensions in the Middle East and a flurry of refinery problems in the United States kept losses in check.
US crude futures fell 87 cents to $63.07 a barrel, down from a peak of $64.27 hit in electronic trade before the regular session, while London Brent crude shed 72 cents to $61.98 a barrel.
The profit-taking came as Opec's head said Tuesday that global oil supply was exceeding demand.
"These incremental volumes have led to global supply exceeding demand over the last two years, allowing stocks to continue to build to well over the five-year average," Opec President Sheikh Ahmad al-Fahd al-Sabah of Kuwait said in a statement released by the Opec news agency.
Adding to pressure, the US government issued a report Tuesday predicting higher distillate stockpiles on the East Coast this winter than last year despite higher demand - easing worries of a heating oil crunch.
But dealers said the market remained on a bullish footing due to security concerns in Saudi Arabia, tensions in Iran, and a spate of refinery trouble in the United States that could crunch fuel stockpiles.
"The market has given its verdict: it's going to be above $60 for quite a long time," said Kevin Norrish of Barclays Capital.
In the world's top exporter Saudi Arabia, US missions were shut for a second day because of the threat of attacks.
The United Nations' nuclear watchdog, meanwhile, was to hold an emergency meeting in Vienna after Opec's second biggest producer Iran restarted work at a uranium conversion plant, defying the European Union and running a risk of UN sanctions.
"By far the biggest jolt to the markets has come from the geopolitical front," said Edward Meir, an analyst at brokers Man Energy. "We think that the bigger source of tension is emanating from the Iranian situation," he added in a report.
Despite the rampant rise in oil prices, there is no sign yet of demand letting up. Worries that the world's biggest consumer the United States may run short of gasoline after a string of unexpected refinery closures has contributed to the price surge.
The US Energy Information Administration revised down its fourth quarter and full 2006 demand growth estimates slightly on Tuesday, but the estimates remained relatively robust at 2 million and 1.8 million barrels per day, respectively.
The EIA also said distillate stockpiles on the US East Coast, the epicenter of global heating oil demand, would be higher than last year heading into the peak winter months, despite higher demand.
More than a dozen US refiners have been forced to close down units unexpectedly in the past few weeks as a summer of near full-throttle operations begins to take its toll.
Adding to the list, Sunoco Inc shut its 200,000 barrel per day (bpd) Philadelphia refinery at the weekend after a fire, while Valero Energy Corp also cut gasoline production by 50,000 bpd at its Sunray, Texas, refinery.
The glitches, coupled with still strong demand, should cause another fall in weekly US gasoline inventories, industry analysts predicted.
Gas supplies were expected to drop by 1.9 million barrels, with crude inventories dipping just 600,000 barrels. US government data on industry inventories are to be released Wednesday morning.
Pump prices in the United States reached a record high $2.37 a gallon last week, the government said on Monday, but the global economy has so far largely shrugged off higher fuel costs.
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