US light crude for February slipped 17 cents to $60.15 a barrel by 0734 GMT, after gaining over $2 in the previous two trading days. London Brent crude was 37 cents down at $57.70 a barrel.
Prices in New York have averaged $56.70 a barrel in 2005, almost 37 percent more than the 2004 average, as growing fuel demand led investors to buy into worries over tightly stretched supplies. Analysts forecast an average price of $57.34 for 2006.
The market was boosted on Thursday by US government data that showed a larger-than-expected 900,000 barrel drop in US distillate inventories, including heating oil, and a surprise 1.2 million fall in gasoline stocks last week.
"US gasoline inventories have fallen further below their five-year average, while US oil demand remains strong," said Barclays Capital in an energy report.
"Our estimates of current market balances indicate a significant tightening relative to a year ago."
Fuel supplies in the world's largest oil consumer fell as demand held firm and foreign shipments slipped, the US Energy Information Administration said in its weekly report.
Gasoline stocks are now 13 million barrels or nearly 7 percent below last year's level, raising concerns over low levels at a time when refiners normally build inventories ahead of peak summer demand in the northern hemisphere.
"Given heavy planned spring maintenance and persistent hurricane-related outages, (refinery) runs are unlikely to ramp up to near full rates until mid-year at the earliest," said J.P. Morgan in a report.
Oil and natural gas output from the storm-battered Gulf of Mexico is slowly recovering, but about 27 percent of the Gulf's 1.5 million barrels per day of crude production remained shut on Thursday, the US Minerals Management Service said.
Fears over lost supply from hurricane damage drove US oil to a record $70.85 at the end of August, before a global release of emergency oil stocks and signs of high prices taking their toll on demand pushed prices back down.
US government data showed crude stocks rose a slight 100,000 barrels last week, against forecasts of an 800,000 barrel drop. US crude stocks are now 36.1 million barrels above this time last year. The swelling stockpile is adding to expectations that producers cartel Opec will cut crude output when it meets at the end of January. "The dichotomy in the US market between tight products and flush crude has become more pronounced," said Barclays Capital.
Iran viewed a one million barrel per day cut by Opec as a "good figure" when the cartel meets on January 31, the country's oil minister said in a newspaper interview on Wednesday.