LONDON: Brent was steady above $111 on Tuesday as concerns over Europe's economic health kept prices in check, while US oil rose for a third straight day to hit a fresh three-month high.
Brent crude futures were down by 4 cents to $111.41 a barrel by 1214 GMT as it flipped between being barely positive and barely negative.
US crude was trading up $3.13 at $94.40 after hitting $94.65, the highest intraday price since early August.
US crude futures outpaced the rest of the oil futures complex . US crude has risen more than 10 percent over the past three trading sessions, compared with a gain of about 1.5 percent in Brent crude prices.
On Monday, the US prompt December 2011 contract rose above the January contract, flipping into a price structure known as backwardation, which typically reflects tight markets.
It is the first time since October 2008 that the spread between the prompt and second-month contracts closed at backwardation, according to Reuters data.
Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas, said this was prompted by closing some positions in the spread between US crude and Brent.
"Yesterday's move and the surge in the prompt US crude price is more reflective of unwinding of positions on the US crude/Brent spread, which has also moved a lot," he said.
The unwind may have potentially been triggered by the death of former Libyan leader Muammar Gaddafi and the perception that the resumption of light Libyan oil to the market would accelerate, pressuring Brent prices, he said.
The discount on US crude against Brent narrowed to as little as $16.77 a barrel, the tightest since early July.
Oil inventories have remained below year-earlier levels in the United States and Europe.
The market was closely watching US supplies for direction as weekly inventory data from the American Petroleum Institute (API) and the US Energy Information Administration (EIA) will be released on Tuesday and Wednesday respectively.
Analysts forecast an increase of 2 million barrels in US crude inventories, with refined products falling.
Economic concerns continued pressure on Brent crude as EU leaders meet to adopt a plan to reduce Greece's debt burden.
"The real economy in Europe is not that strong," said Masaki Suematsu, a broker at Newedge in Tokyo.
But the fall in Brent crude prices was limited by relatively strong corporate earnings. Oil and gas firm BG Group and Deutsche Bank beat forecasts, helping underpin European shares.
Despite concerns over the euro zone debt crisis and widespread expectations of an economic slowdown, Brent crude oil prices are forecast to stay well above $100 per barrel, a Reuters poll showed on Tuesday.
A Reuters poll of 35 analysts showed Brent crude averaging $106.80 per barrel next year and $108.60 in 2013 as demand for fuel from China and emerging economies keeps the global oil market tight.
US crude is forecast to average $92.00 a barrel in 2012 and $99.50 in 2013.
Copyright Reuters, 2011
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