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 Easing concerns about supplies also put a lower ceiling on prices.
Trading was cautious in Asia as market participants awaited the U.S. Federal Reserve's decision on interest rates later Wednesday.
Analysts believe a quarter percentage point rate cut is already factored into the oil market. A decision to hold rates steady could further strengthen the dollar, though, causing oil to continue its slide.
"The markets will now wait and see ... what's going to happen tonight, unless there's more news on the supply side," said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney.
Light, sweet crude for June delivery fell 67 cents to $114.96 a barrel on the New York Mercantile Exchange by midafternoon in Singapore. The contract fell $3.12 to settle at $115.63 a barrel Tuesday after the release of a monthly report from the U.S. Energy Department.
The data showed demand for finished petroleum products dropped 8.5 percent in February from January, and demand for gasoline fell 6.2 percent. Some of that drop can be attributed to February's being a shorter month, but it still suggests high prices are cutting America's appetite for fuel.
At the same time, supply concerns in some places are easing. A British refinery strike that caused the shutdown of a 700,000-barrel-a-day pipeline system ended Tuesday. Listing other bullish factors, Vienna's JBC Energy noted "talks under way to end the six-day strike at an ExxonMobil site in Nigeria and production in the North Sea being ramped up after the recent short-term closures of the Forties Pipeline system."
In the U.S., the Energy Department's weekly inventory report on Wednesday was also expected to show domestic crude supplies rose, according to analysts surveyed by Platts, the energy research arm of McGraw-Hill Cos.
U.S. crude oil inventories were expected to have risen 1.6 million barrels last week, with crude imports continuing to grow as refiners ramp up production, the Platts survey said.
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 Analysts projected a decline of 800,000 barrels in gasoline stocks and a 150,000-barrel build in stocks of distillates, which include heating oil and diesel, the survey showed. Refinery utilization was expected to edge up 0.3 percentage points to 85.9 percent.
The oil market is also expected to keep an eye on other key information releases later this week such as the U.S. Labor Department's payroll report, Moore said.
"Those things are going to be very important to the direction of the U.S. dollar and also perceptions of the strength of the U.S. economy, and therefore very important to the oil price," he said.
Commodities such as oil are less effective hedges against inflation when the dollar is gaining ground, and a stronger greenback makes oil more expensive to investors overseas. Analysts believe oil's run from $65 a year ago to a record near $120 on Monday has been fueled in large part by the dollar's protracted decline.
In other Nymex trading, heating oil futures were nearly flat at $3.252 a gallon while gasoline prices fell more than a penny to $2.9253 a gallon. Natural gas futures fell by more than 2 cents to $10.8 per 1,000 cubic feet.
Brent crude futures slid 43 cents to $113 a barrel on the ICE Futures exchange in London.
[Associated Press; By GEORGE JAHN]
Associated Press writer Gillian Wong contributed to this report from Singapore.
Copyright 2008 The Associated Press. All rights reserved. This
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