London Brent crude was at $58.10, up six cents. US demand for heating oil was expected to be about 42 percent below normal this week, as temperatures remain mild in the US Northeast, the world's largest oil consuming region, the US National Weather Service said on Monday.
"The market is focusing on weather, which is softening product demand everywhere in the Northern Hemisphere, not just the United States Northeast," said Naohiro Namura, vice president at the derivatives unit at Mizuho Corporate Bank in Tokyo.
In Japan, the world's third-largest oil consumer where demand for heating can soar in winter months, the weather was expected to remain normal or warmer than normal in most areas for the next two weeks.
Expected rises in US oil inventories are also weighing on prices.
Market sentiment has reversed after fears over product shortages in the wake of hurricane disruptions to United States production helped drive prices to a record $70.85 in late August.
United States inventories of distillates, including heating oil and diesel, are expected to have risen 600,000 barrels last week, the first gain in seven weeks because of sluggish demand, analysts said in a Reuters survey.
They said US government data due on Wednesday was also expected to show a 1.0 million barrel gain in gasoline inventories and a 1.4 million barrel build in crude stocks, amid heavy imports and higher refinery use.
US crude production from the Gulf of Mexico region continued to recover slowly after hurricanes Katrina and Rita, though 51.54 percent of the region's 1.5 million barrels per day capacity remains shut, the United States government said on Monday.
Traders said uncertainty about the longer-term supply and demand is preventing a sharper price fall.
"It is difficult to sell off actively because there is a lingering fear that if something should happen to refiners or a cold spell hits, it will immediately tighten supplies," Mizuho's Namura said.
In the US Gulf region, three refineries accounting for just fewer than 5 percent of the country's total capacity remained offline as of Monday following Katrina and Rita.
The International Energy Agency (IEA) warned on Monday that energy demand will soar by more than 50 percent by 2030 if consumers continue to burn oil unchecked, and that failure to invest enough in oil facilities might result in putting an extra $13 a barrel on projected prices.
The West's energy watchdog also said in its World Energy Outlook that the world's largest oil producer Saudi Arabia and other suppliers would have to spend $56 billion on rigs and refineries every year to keep up with booming demand.