NEW YORK (CNN/Money) - Oil prices eased moderately Tuesday after hitting two-year highs a day earlier as the market considered signals that OPEC may raise oil output, but gold prices rose near $350 an ounce as concerns of war remained .

U.S. light crude for the February contract fell 17 cents to $31.20 a barrel, more than $2 off a two-year peak struck during trading Monday at $33.65, and Brent oil futures slipped $1 to $28.66 in London trading.

Comex gold for February delivery gained $4.10 an ounce to close at $348.20.

Benchmark oil markets in London and New York will be closed Wednesday for the New Year holiday. Oil prices spiked Monday but retreated significantly later in the day after news from OPEC.

The Organization of the Petroleum Exporting Countries (OPEC), which controls two-thirds of world crude exports, said Tuesday it is set to raise output by at least 500,000 barrels a day unless oil prices drop sharply in the next two weeks.

Under an informal output mechanism, OPEC aims to keep the price of its reference basket of seven crudes in a range of $22 to $28 a barrel by increasing supply if prices exceed the upper end of the band for 20 consecutive trading days.

OPEC's reference basket stood at $31.06 Friday, the ninth day it has been above the target band.

"The 500,000 barrels a day is sure. More than that is subject to ministerial consultations, which are already underway," the OPEC delegate told Reuters.

"What we're seeing this morning is in response to OPEC's comments and also some old-fashioned year-end book squaring," said Peter Gignoux, oil analyst with Salomon Smith Barney in London. "Oil prices rose sharply and then fell. The market is doing some to-and-fro action, where traders saw the fluctuations and thought about pulling back instead of buying at the higher prices."

"But having said that, the same problems still exist with the strike in Venezuela and the Iraq situation," Gignoux added.

Brokers said crude markets remained vulnerable to sharp moves either way with uncertainty over whether Venezuelan authorities will break a near month-old strike that has brought the nation's oil exports to a trickle.

Price volatility also reflects the looming threat of war in Iraq, which exports roughly two million barrels per day (bpd) of crude oil, equivalent to about 3 percent of global crude demand.

Traders fear wider disruptions to crude supplies from the Middle East, which accounts for about one-quarter of global supply.

"We are facing an interesting 2003 as the global economy recovers, with oil demand looking much better and several geo-political oil price flash points," independent oil analyst Simon Games-Thomas said.

Concerns over the Venezuelan outage biting into U.S. oil supplies during the peak winter heating season and possible disruptions in Middle East oil flows due to the Iraq situation have pushed crude up by more than $5 since the beginning of December. Venezuela is the fifth-biggest oil exporter, producing about 200,000 bpd against more than three million bpd in November, after the nationwide strike began Dec. 2 in an attempt to force President Hugo Chavez to resign.

The price rally has rekindled worries that high energy costs will deter investment and take the steam out of the global economic recovery.

Analysts expect the Venezuela export stoppage to begin to show up in this week's statistics for U.S. fuel stockpiles, with crude tanks forecast to show a decline of slightly more than 3.7 million barrels. The American Petroleum Institute will release its weekly inventory report after the close of trading in New York.  

-- from staff and wire reports