Oil prices eased from recent peaks on Tuesday as leading world producer Saudi Arabia raised crude exports to feed Asian-led global demand growth.
May crude on the New York Mercantile Exchange dropped 47 cents to $37.37 a barrel after jumping 70 cents on Monday. London Brent crude, which did not trade on Monday due to a public holiday, rose six cents to $33.40 a barrel.
But US crude is still within 70 cents of a 13-year closing high above $38 struck last month. Fears that rising violence in Iraq could threaten oil supplies and low US gasoline inventories heading into peak summer holiday demand have helped fuel a rise of three dollars, or nine percent, since the start of April.
As prices surge, top Opec producer Saudi Arabia has increased supply to Asian and European customers by more than 300,000 barrels per day compared to April.
Asia absorbs around half of Saudi Arabia's more than five million bpd crude exports, while Europe takes about 20 percent of the kingdom's supplies.
Industry sources said a heavy second quarter maintenance schedule at Saudi refineries had freed up more crude for export.
The move has strengthened doubts over how strictly Opec producers will enforce a pledge late last month to reduce output by one million bpd, or four percent, from April 1.
"Opec has made little or no progress reducing overproduction with previous quotas, and the Saudis have implied that they will not cut production with prices near all time highs," said Sarah Emerson, Managing Director of Energy Security Analysis in Boston.
However, Saudi Arabia did not increase exports to the United States despite recent criticism from the Bush administration of Opec's decision to cut production when US gasoline prices are running at record highs.
Opec has said that new environmental fuel regulations and a lack of refinery capacity - rather than any shortage of crude - is to blame for the low US gasoline stocks.
Asia is driving world demand growth with crude imports to China, now the world's second largest oil consumer, soared 35.7 percent year on year in the first quarter of the year.
The International Energy Agency, energy adviser to 26 industrialised nations, on Friday raised its estimate of first-quarter Chinese oil demand by 180,000 bpd to a record 6.14 million bpd - an 18 percent increase from last year.
Economists said on Tuesday that China's economy likely saw annual growth of between nine and 10 percent in the first quarter, defying government attempts to head off overheating and the threat of inflation.
Rising violence in Iraq has also driven up prices on fears that militants may target oil facilities in the run-up to the planned June 30 handover of power to the Iraqis.
US, Japanese, Russian and Chinese civilians in Iraq have been kidnapped by insurgents in recent days as the US-led coalition attempts to quell resistance that flared up in Falluja and other cities.