Expectations of a bidding war between Chevron Corp. (CVX) and a Chinese oil company jockeyeing to scoop up Unocal Corp. (UCL) grew on Thursday as the U.S. oil producer's board meets to discuss the competing bids.

Chinese state-run oil company CNOOC Ltd. (CEO) has already tweaked its $18.5 billion bid made last month to provide additional assurances for Unocal, and its shares fell earlier on Thursday on fears it could be forced to raise its $67-a- share cash bid.

But a person familiar with the situation said no decision had been made yet on whether or when CNOOC would hike the bid and that suggestions of a $69-a-share offer were "pure speculation."

For now, CNOOC has agreed to set aside roughly $2.5 billion in an escrow account that would be paid to Unocal shareholders if the Chinese firm backed out of the deal, sources familiar with the situation have said.

Chevron, on the other hand, has continued to stand by its $16 billion-plus agreement signed in April, though some analysts and investors expect the company to sweeten its bid as a crucial vote by Unocal shareholders on Aug. 10 draws near.

Shares of CNOOC fell 1.5 percent on Thursday — after falling as much as 5 percent earlier in the day — as investors fretted the Chinese oil company would sweeten its offer.

"On balance, I would not like to see CNOOC raising their bid too aggressively from here. I think they have offered a lot," said Edmund Harriss, fund manager at the Guinness Atkinson China & Hong Kong Fund, which owns about 11 million CNOOC shares. "The value for CNOOC will start to drop off quite significantly if they raise the bid too much further. I would not be comfortable with that."

Since CNOOC announced its bid for Unocal in late June, its stock had jumped nearly 19 percent in the three weeks ended on Wednesday.

CNOOC has been battling not just Chevron in this takeover battle, but growing opposition from some U.S. politicians, who have said it could jeopardize national security interests.

The Chinese company has agreed to make guarantees it can meet all U.S. national security-related requirements and sell its U.S. assets if required, sources have said.

CNOOC would "respond tactically" and immediately if the Unocal board rejects its bid or Chevron sweetens its offer, one source said.