Brent crude oil fell below $105 per barrel on Tuesday, after the risk premium caused by an Israeli air strike on Syria faded.
The benchmark hit its highest in nearly a month above $105 in the previous session on fears of supply disruption following Israeli air strikes on Syria close to Damascus.
Israel played down the air strikes, saying the raids were not aimed at influencing its neighbor’s civil war, but only at stopping Iranian missiles reaching Lebanese Hezbollah militants.
Brent crude dropped 66 cents to $104.80 a barrel by 8.32am GMT, after settling up at $105.46, its highest finish since April 10 on Monday.
Brent has rebounded more than $6 a barrel since falling below $99 last Wednesday. U.S. oil fell 71 cents to $95.45, after ending 55 cents higher.
Analysts expect crude oil could rise further on renewed optimism about the health of the global economy, thanks in part to supportive measures from central banks.
The Reserve Bank of Australia cut its cash rate by 25 basis points to a record low of 2.75 percent.
On Monday European Central Bank president Mario Draghi said that the ECB would cut rates again if needed, including pushing its key deposit rate into negative territory.
"There's a risk premium pull-back today, but more generally there's a glow of comfort for investors, with central banks in Europe and the United States more supportive across the board," said Bjarne Schieldrop, chief commodity analyst at SEB in Oslo.
Attention focused again on China, the world's second largest economy, ahead of preliminary April trade data due on Wednesday.
China's crude oil imports last month were expected to have held near March levels, which were 2.1 percent lower than a year earlier.
Chinese inflation data on Thursday and money supply and loan growth figures expected from Friday will also be watched.
Expectations of a further build in U.S. commercial crude oil stocks, after hitting a record high, dragged on prices.
A preliminary Reuters’ poll, taken ahead of weekly inventory reports from the American Petroleum Institute (API) and the U.S. Energy Department's Energy Information Administration (EIA), forecast on average that crude stocks increased by 1.8 million barrels in the week ended May 3.
Prices may rise in the second half of 2013, Morgan Stanley said in a research note. The bank said the global oil balance looked much tighter this summer, with Brent likely to trade up to $110 to $115 in the second half.
In the week to April 30, hedge funds and other larges peculators increased bets on higher Brent prices, upping net long positions by 9,614 contracts to 108,741, data from the Intercontinental Exchange (ICE) show.