Oil prices slipped towards $109 a barrel on Tuesday as investors took profits ahead of the latest Fed comments on the scaling back of its stimulus programme although unrest in Egypt and reduced Libyan oil product supply curtailed the losses.
Investors are waiting for the minutes from the Fed's latest policy meeting which are due on Wednesday for new clues on when it plans to taper its monthly $85 billion in asset purchases which have supported commodities in recent years. Many believe tapering could begin next month.
Brent crude oil futures for October were down 59 cents to $109.31 a barrel at 1100 GMT. U.S. crude oil futures for September were down 71 cents to $106.39.
"Ahead of Wednesday's publication of the Fed's meeting minutes, market players are clearly taking profits while they can. This could also put pressure on the oil prices today, as optimism among financial investors is still high," analysts from Commerzbank said.
Supporting oil prices, U.S. commercial crude inventories likely fell last week by 1.4 million barrels, an initial poll of Reuters analysts showed ahead of the release of weekly data.
Industry group API is set to release its stockpile report on Tuesday at 2030 GMT. The U.S. Energy Information Administration issues its data on Wednesday at 1430 GMT.
The HSBC China flash manufacturing PMI data due on Thursday will also be scrutinised for further clues to demand growth in the world's second-largest oil consumer.
MIDDLE EAST UNREST
Libya was forced to suspend contractual obligations with a force majeure on some oil exports on Monday, acknowledging weeks of disruption which have cut shipments to their lowest since the civil war of 2011.
About half of Libya's over 1.2-million-barrel-per-day export capacity remains shut down, industry sources said.
Libya's port authority asked customers to remove their tankers from the Es Sider oil export terminal late on Monday to prevent any potential illegal oil sales.
Tensions in Egypt remained high after security forces arrested the top leader of the Muslim Brotherhood, pressing a crackdown on the group.
Almost 900 people, including more than 100 soldiers and police, have been killed since last week in clashes pitting the followers of deposed Islamist President Mohamed Mursi against the army-backed government.
Fears that the unrest may impact ship traffic along the Suez Canal have nevertheless eased.
"There is a slow realisation that the price rise we've seen in recent days was overdone and that the Egyptians and Americans will never let the Suez Canal be blocked," CMC Markets analyst Michael Hewson said. (Additional reporting by Jessica Jaganathan in Singapore; editing by Jason Neely)