US crude for April slid 11 cents to $81.98 a barrel by 0948 GMT, after touching $83.03 on Wednesday, the highest level since oil's 15-month high of $83.95 on Jan. 11.
Oil fell below $82 a barrel on Thursday, back from an eight-week high in the previous session as a spike in Chinese inflation had investors mulling prospects of monetary tightening in the heart of energy demand growth.
Expectations the Organisation of the Petroleum Exporting Countries (OPEC) will pump well above production targets next quarter also weighed on sentiment, but falling gasoline inventories in the United States and the first signs of a recovery in demand in 18 months underpinned prices.
US crude for April slid 11 cents to $81.98 a barrel by 0948 GMT, after touching $83.03 on Wednesday, the highest level since oil's 15-month high of $83.95 on Jan. 11. London ICE April Brent fell 15 cents to $80.33 a barrel.
"While we think crude prices will test their 2010 high, they are unlikely to substantially exceed it," MF Global analyst Edward Meir said. "Instead, a potential double-top at $83.95 should provide a technical sell signal that could bring prices back below the $80 mark."
Consumer inflation has soared to a 16-month high in China, the world's second largest oil consumer, and a raft of economic data showed broad-based strength, providing fresh arguments for policy tightening in a bid to stop the economy overheating.
China's booming economy has seen oil imports soar, hitting their second highest ever monthly level in February. On Wednesday, OPEC said Chinese daily oil demand has jumped by almost 2 million barrels in just five years to stand around 8.6 million barrels per day.
The OPEC, which pumps at least one in every three barrels of oil in the world, meets in Vienna on March 17 to discuss production policy. Officials have said this week they do not expect a change in output targets while prices are within their desired range.
"You are going to see $75 to $85 until OPEC changes their views," said Peter McGuire, managing director of Commodity Warrants Australia in Sydney. "Given that the US dollar is appreciating, they are relatively content with what they are receiving for their oil."
The dollar edged higher against a basket of major currencies on Thursday, and is up almost 8 percent since the end of November.
A stronger dollar boosts the purchasing power of oil exporters, including OPEC members. A weaker greenback usually supports oil prices as it makes dollar-denominated commodities less expensive for holders of other currencies.
The OPEC has restricted output since the onset of the financial crisis in a bid to support prices. But the group's compliance with its officially targeted cut of 4.2 million barrels per day (bpd) has slipped to just 53 percent as prices have risen.
Output from the organisation is bloating US crude inventories. They have climbed for the past six weeks, showing a 1.4-million-barrel gain to 343 million barrels in the week to March 5, the Energy Information Administration (EIA) said on Wednesday.
The nation's gasoline stockpiles showed a surprise decrease of 2.9 million barrels, the EIA said, while distillate stocks including heating oil and diesel fell by 2.2 million barrels.
US total oil product demand over the past four weeks was 19.41 million bpd, up 3.8 percent from a year ago.
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