Oil slipped on Tuesday on forecasts for gains in US crude and gasoline inventories, a stronger dollar and technical analysis signalling Monday's rally to a two-month high was overdone.

US crude for November shed 23 cents to $81.24 a barrel at 0357 GMT, more than $1 below Monday's peak at $82.38, the highest price since Aug. 6. ICE Brent for November slipped 26 cents to $83.02.

'Investors have recently become more optimistic, but the oil market is nearly at overbought levels,' said Serene Lim, a Singapore-based oil analyst at ANZ, referring to the relative strength index reaching levels close to 70 in the past few days, a technical signal that prices may be due for a correction.

'It could be more cautious ahead,' Lim said. 'For the release of API numbers today, the market is expecting (crude) inventories to rise because of a rebound in imports and refinery demand slowing down because of the maintenance season in the US'

US crude oil inventories probably rose last week by 600,000 barrels, while gasoline stocks were expected to have gained 100,000 barrels as refinery utilisation dropped, a Reuters poll ahead of weekly inventory reports showed on Monday.

Industry group the American Petroleum Institute (API) will issue its weekly inventory report on Tuesday at 2030 GMT. The US Energy Information Administration (EIA) will follow with government data on Wednesday.

Distillates support

But supplies of distillates including heating oil and diesel were projected to have declined by 800,000 barrels as demand remained strong, particularly for diesel, a major component of this inventory segment, according to the poll.

'As we go into the heating oil season, there could be potential to drive the market even higher,' Lim said.

'Any surprise of better-than-expected US economic data coming out, including today's ISM non-manufacturing PMI and Friday's non-farm payrolls will move the market even higher.'     Friday sees the release of key monthly US employment data.

US economic indicators have so far this week been mixed.

Pending sales of previously owned US homes rose more than expected in August to a four-month high, but new US factory orders fell slightly more than expected.

A crippling strike at France's top oil port, the world's third-largest, will continue on Tuesday and some refineries are expected to run out of crude supplies in about a week, unions and industry officials said.

The upper Houston Ship Channel should reopen by Tuesday night, restoring crude flows to four refiners in Texas holding 4.9 per cent of US capacity before their supplies run low, the US Coast Guard said on Monday.

Asian equities fell on Tuesday, while global equity markets slid a day earlier on lingering concerns about the global economy and the burden of debt in some euro zone countries.

The euro on Monday fell from its highest level versus the dollar in more than six months amid renewed concerns about the financial viability of euro zone banks, prompting investors to cut overly bullish bets on the euro. The greenback continued to strengthen on Tuesday, up 0.2 per cent against a basket of currencies.

Iraq raised its proven oil reserves figure by a quarter on Monday in a bid to match the clout of leading producer Saudi Arabia and strengthen its case for OPEC to grant it a higher output quota. – Reuters