Traders chalked up a sharp decline in oil prices Tuesday to profit-taking ahead of the U.S. government's next petroleum supply report.

With little news to push prices higher Tuesday, trader said the markets also may have keyed on a key OPEC member's reiteration that the group is considering raising its daily production quota by half a million barrels after a similar move last week.

Light, sweet crude for May delivery settled down $1.43 to $56.03 per barrel on the New York Mercantile Exchange (search).

"People have buying this market all the way up," said Mike Fitzpatrick, a broker at Fimat USA Inc. in New York. Tuesday's late-day selloff came at the end of what had been a relatively quiet day for the market and reflected the impulse of some traders seeking "instant gratification," Fitzpatrick said.

Fitzpatrick said these traders may get back into a buying mood Wednesday depending on the details of the Energy Department's (search) weekly petroleum report.

Oil is roughly 50 percent more expensive than a year ago but still well below the inflation-adjusted peak above $90 a barrel set in 1980. Prices have risen by about a third so far this year, fueled by a late cold snap across the world's largest energy consumer, the United States.

They also have been underpinned by a weak dollar, which has made OPEC more comfortable with higher prices, and rising global demand at a time when there is very little excess supply available. These factors could set the stage for a more pronounced spike in prices if there is a production outage.

The Organization of Petroleum Exporting Countries (search), however, has indicated that it is willing to move to try to lower prices from current levels. Last week, the 11-member oil group said it was raising its daily output quota by 500,000 barrels in preparation for high-demand next winter in the Northern Hemisphere. Markets shook off the move, however, because it did not actually add more supply to the market.

On Monday, Saudi Oil Minister Ali Naimi said OPEC, which produces around 40 percent of the world's oil needs, was deliberating raising daily output by an additional half-million barrels.

Naimi, whose country is the organization's main producer, also said Saudi Arabia was prepared to unilaterally increase its output from the present 9.5 million barrels a day to 11.5 million barrels "if we have a customer."

Purvin & Gertz oil analyst Victor Shum said OPEC's decision last week to increase output in the second quarter, when demand typically drops because of warmer spring weather, will result in a much-needed global supply cushion.

"As the cushion expands from the current level, some market participants ought to start taking profits," he said in Singapore. "Pricing should ease a bit."

Some analysts, however, remain wary that there would be no actual addition to OPEC production, as the cartel was already producing above its quota.

Shum also cautioned that OPEC's zeal in increasing output might backfire, as it leaves little leeway in the supply chain for any output glitch.