U.S. oil producer Unocal Corp. (UCL) held a second board meeting to discuss a fine-tuned $18.5 billion bid from state-run Chinese firm CNOOC Ltd. (CEO), people familiar with the matter said on Monday.

The board, meeting in California Sunday night, discussed whether to back the CNOOC offer or stick with an earlier-accepted $16 billion-plus bid from global major Chevron Corp. (CVX), the sources told Reuters. So far, Unocal has not notified CNOOC about its stance on the Chinese bid, they said.

Unocal has maintained silence on the takeover battle since late June, frustrating some shareholders, who say the board should be more aggressive in trying to get both sides to raise their offers.

"Right now, there's a stalemate," said one U.S. fund manager who holds a stake in Unocal. "To get Chevron to move, the board needed to show that they were willing to endorse the Chinese bid. Obviously, the board is not willing to do that after two meetings. So we're stuck."

Analysts have said it is likely that both Chevron and CNOOC are reluctant to be the first to raise their offers and trigger a bidding war.

But expectations of such a bidding war have risen in recent days, pushing up Unocal shares about 10 percent past Chevron's $60 a share offer to around $65 a share. CNOOC shares slid percent on Monday, their third consecutive day of losses, on fears it could raise its bid further and cut into any value CNOOC shareholders would derive from the acquisition.

Peter Schoenfeld, chief executive officer of New York-based investment firm PSAM LLC, which holds 1 million Unocal shares, said CNOOC may need to raise its bid to win Unocal's support.

"We feel CNOOC would be well advised to put an improved or best bid on the table now," Schoenfeld told Reuters. "At this point CNOOC is not purely bidding against Chevron, but to gain support of the board of Unocal to forego their 'bird in hand."'

Chevron, the No. 2 U.S. oil company, has stood by its deal signed in April, though some analysts and investors expect it to raise its bid as a crucial vote on the deal by Unocal shareholders on Aug. 10 draws near.

Unocal had not chosen the CNOOC offer partly because of concerns that U.S. regulators might not approve the deal.

U.S. political opposition to the Chinese offer is growing as some believe a sale of Unocal, which has assets stretching from Myanmar to the Gulf of Mexico (search), to a Beijing-controlled firm would harm U.S. national energy security.

The U.S. House Energy and Commerce Committee will hold a hearing on CNOOC's bid for Unocal on Tuesday, on the heels of a Congressional hearing last week at which critics lashed out against the Chinese bid.

"It's my judgment that U.S. strategic interests are not served by selling a U.S.-based oil company to a company that's 70 percent owned by the Chinese Communist government," Rep. Joe Barton, the Texas Republican who chairs the House energy committee, said in a statement on Monday.

Lawmakers and Chevron also say it is hard for Chevron to compete with CNOOC on financing terms. CNOOC's bid is financed with low and zero-interest loans from state entities.

CNOOC has tweaked its bid to provide more assurances for Unocal. CNOOC is setting aside $2.5 billion in an escrow account in the United States that would be paid to Unocal shareholders if the Chinese firm walked away from the deal.

But CNOOC would not owe any money if the U.S. government blocks the deal, as long as it met all conditions set in its contract to address U.S. security concerns.

CNOOC is also putting an additional $500 million in escrow, which would be used to pay Chevron as a break-up fee if Unocal accepted the Chinese bid.