Brent crude slipped 15 cents to US$96.99 a barrel by 0350 GMT
Brent crude slipped below US$97 on Wednesday, ahead of a meeting of producer group OPEC this week, and as uncertainty over Europe's ability to tackle its debt crisis intensified fears of a slowdown in oil demand growth.
Investors are watching for any change in the group's output policy, with price hawks calling on Saudi Arabia to rein in excess production. They are also awaiting Greek election results for a sense of the steps policymakers may take to tackle Europe's deepening debt crisis.
Brent crude slipped 15 cents to US$96.99 a barrel by 0350 GMT, posting declines for the fifth straight day in its biggest losing streak in a year. US crude fell 37 cents to US$82.95, reversing the gains of the previous session.
"We will see investors stepping aside or repositioning ahead of these key events," said Natalie Robertson, an analyst with ANZ. "There is the risk of getting caught on the downside. There is going to be volatility."
Brent may trade between US$96 and US$102 per barrel with the US benchmark in an US$80 to US$86 range over the next few days, Robertson said. The band is wide because of the uncertainty and a lot of expected volatility, she said.
OPEC and the US government agreed on Tuesday that global oil markets could weaken further in the second half of the year, with prospects for demand dimming.
In its monthly report on market fundamentals, the US Energy Information Administration, or EIA, cut its forecast for oil demand growth this year by 150,000 bpd to 810,000 bpd as the European crisis weighs on demand.
Brent has fallen from a peak of more than US$128 a barrel in March, prompting calls from exporters such as Venezuela to stem a slide that has knocked US$30 a barrel off prices.
Saudi Arabia has lifted output to 10m barrels a day, its highest in decades, to help nurse global economic growth in what Saudi Oil Minister Ali al-Naimi has called a "type of stimulus" for the economy.
That has taken supply from the Organisation of the Petroleum Exporting Countries to 31.6m bpd in May, an OPEC report said on Tuesday, well above the official 30m bpd target it set in December.
The Greek elections over the weekend, which may determine whether the country stays in the euro zone, are weighing on prices as further chaos in the single currency region may affect global demand for oil.
Raising the stakes further, Austria's finance minister said Italy might need a financial rescue because of its high borrowing costs. While the comment drew a sharp denial from the Italian prime minister, it stoked fears that Europe is far from ending 2-1/2 years of turmoil.
Data on crude stockpiles in the world's top oil consumer, the US, will also provide fresh price direction.
US crude stocks climbed unexpectedly last week thanks to a large increase on the West Coast, although stockpiles in the key Cushing storage hub declined, data from the American Petroleum Institute (API) showed on Wednesday.
Crude inventories rose by 1.6m barrels, contrary to analysts' expectations in a Reuters poll for a draw of 1.4m. The Energy Information Administration numbers are due later in the day.
"Market participants will be watching just to see if the trend of a fall in stockpiles continues," said Robertson.