Global oil supply exceeded demand throughout 2012, inflating oil inventories and providing a sizeable cushion to cope with any potential supply disruption.

The Organization of the Petroleum Exporting Countries (OPEC) has begun to reduce output and pumped its lowest volumes in more than a year in December in an attempt to head off a price fall.

But many investors argue the action may have come too late and oil prices are likely to slip in the next few weeks.

"The over-riding fundamental feeling in the market is that crude oil is over-supplied in 2013," said Tony Nunan, an oil risk manager at Mitsubishi.

Brent futures for was down by 20 cents to $111.69 per barrel by 0920 GMT. US crude shed 40 cents to $95.16 per barrel after touching a four-month high last week.

US markets are closed on Monday for a holiday.

Oil analysts at US brokerage Jefferies Bache say the rally in US crude futures may be over for a while and the next move is likely to be downwards.

"We are in process of shifting from a bullish to a bearish trading stance with the extent of price declines into month's end heavily reliant upon economic guidance," they wrote in a note to clients.