Oil prices eased on Tuesday, with Brent hovering below $115 on an anticipated slowdown in Western air strikes on Libya

Anti-aircraft fire rang out across Tripoli for a third night on Monday, but U.S. President Barack Obama, wary of getting sucked into a Libyan civil war, said the United States will cede control of the air assault in days.

Front month Brent crude was 29 cents lower at $114.67 at 1212 GMT, still within sight of a two and a half year high near $120 hit last month.

U.S. crude for May, the most liquid contract before the expiry of April later on Tuesday, shed 21 cents to $102.88.

Oil gained around 1 percent on Monday, the first trading day after U.N.-backed western powers launched the military campaign but Libyan rebels have so far done little to capitalize on their advantage, fuelling speculation the conflict could grind to a stalemate.

Edward Meir, senior commodities analyst at MF Global, said much of the Libyan supply disruption had already been priced into the market.

Short-term, we suspect that the crude oil market is somewhat overextended here, as the fighting in Libya will lose its ability to spark the market higher, he said. For all practical purposes, investors have reconciled themselves with the fact not much oil will be flowing out of Libya anytime soon.

Violent political unrest has reached countries bordering OPEC king-pin Saudi Arabia, the world's largest oil exporter and only swing state with enough spare capacity to plug serious production shortfalls elsewhere.

JAPAN CRISIS

Prices have seesawed over the past week as concerns over Western military intervention in Libya offset the risk aversion that swept global financial markets after Japan's worst earthquake on record, tsunami and resulting nuclear crisis.

Japan will allow the release of an additional 22 days worth of crude oil from privately held reserves in a bid to ease energy shortages the trade ministry said, after allowing the release of 1.26 million kilolitres of reserves, or three days worth of demand, last week.

This should bridge short-term supply gaps after the earthquake disaster. Japan's oil demand should rise accordingly when these stocks are replenished, Commerzbank analysts said in a note.

Analysts expect weekly reports on U.S. oil inventories will show gasoline and distillate stockpiles fell last week, which should support product values.

Industry group the American Petroleum Institute will publish inventory statistics for the week ended March 18 on Tuesday, followed by U.S. government data from the Energy Information Administration on Wednesday.

(Additional reporting by Alejandro Barbajosa, editing by William Hardy)

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