Oil was lower in Asian trade on Thursday after spiking close to eight-month highs overnight, but prices remained underpinned by rising tensions between western powers and major crude producer Iran.
New York's main contract, West Texas Intermediate light sweet crude for delivery in February, was down 24 cents to $102.98 a barrel in morning trade.
The contract on Wednesday jumped to $103.74, a level last touched on May 11.
Brent North Sea crude for February delivery shed 75 cents to $112.95.
Phillip Futures said an agreement in principle by European governments to ban imports of Iranian oil is expected to further bolster prices.
"The embargo will force Tehran to find other buyers for its oil. EU nations buy about 450,000 barrels per day (bpd) of Iran's 2.6 million bpd in exports," it said in a market commentary.
"The bloc is the second largest market for Iranian crude after China. The prospective embargo by the European Union and tough US sanctions represents concerted effort by the West to contain Iran's nuclear ambitions."
Traders were also closely monitoring the situation in the Strait of Hormuz in the Middle East as Tehran warned the US to remove its naval forces from the Gulf. About 20% of the world's oil passes through the crucial waterway.
{{/usCountry}}Traders were also closely monitoring the situation in the Strait of Hormuz in the Middle East as Tehran warned the US to remove its naval forces from the Gulf. About 20% of the world's oil passes through the crucial waterway.
{{/usCountry}}Phillip Futures said the market will also be watching France's bond sale of up to eight billion euros taking place amid the debt crisis in the eurozone.
"The bond auction is likely to be closely watched as the nation could lose its top credit rating in the coming weeks. France's sale also comes a day after a subdued German auction," it said.