Oil eases as weak demand outweighs OPEC

European stock markets, which have acted as an indicator for global oil demand recently pared gains and put pressure on oil prices.

U.S. light crude for November delivery CLc1 fell 27 cents to $73.98 a barrel by 0933 GMT, after earlier hitting a session high of $75.69. Prices jumped by $2.40 on Monday.

The market hit a record high above $147 in mid-July.

London Brent crude shed 30 cents to $71.73 a barrel.

"I think they moved in line with equities yesterday and are now pulling back, using stock markets as a barometer for demand," said Christopher Bellew at Bache Commodities.

Britain's leading share index was flat in early trade after two sessions of good gains, while U.S. stock futures point to a lower opening on Wall Street.

Eyes on OPEC Cut

Expectations that the Organization of the Petroleum Exporting Countries may only make modest output cuts this week have not been enough to sustain oil's gains.

An OPEC source told the Saudi-owned al-Hayat newspaper that the cartel might not need a hefty oil output cut when it meets on Friday, as others in OPEC talked of a possible cut of more than a million barrels per day (bpd), perhaps in stages.

While OPEC ministers were expected to cut output at the emergency meeting in Vienna, a debate on how much oil they should take off global markets could be intense as they balance price needs against risks to a fragile world economy.

The International Energy Agency, which advises industrialised countries, said an OPEC output cut could prolong a global economic slowdown.

Analysts said support for prices also came on forecasts for colder weather in the U.S. Northeast, the top heating oil market.

"Oil demand will still pick up even if the U.S. was in the midst of a recession," Purvin & Gertz's Shum said.

U.S. crude oil inventories probably rose 2.3 million barrels last week, a preliminary Reuters poll ahead of the U.S. government oil data due on Wednesday showed.

The poll also showed forecasts for a 100,000-barrel rise in distillate inventories, which include heating oil and diesel, and a 2.1 million barrel gain in gasoline supplies.