US crude, Brent up

Oil rose on Tuesday, shaking off two days of losses to turn positive on a weaker dollar and supportive technicals. Trading was volatile and US crude futures posted stronger gains than Brent, narrowing the spread between the contracts to below $21 a barrel. The previous session, Brent's premium had pushed to within pennies of its June 15 record of $23.34.
The dollar index weakened and the euro trimmed losses after slumping to a four-month low against the greenback as risk aversion tied to the European debt crises eased slightly. A weaker dollar is usually supportive to dollar-denominated oil prices. Oil and US stocks also got a lift after the Federal Open Market Committee's minutes said some Federal Reserve officials were ready to provide more monetary easing if the recovery was too sluggish to cut the nation's unemployment rate. Brent crude futures for August rose 51 cents to settle at $117.75 a barrel, having swung between $114.95 and $117.83.
The August Brent crude contract expires on Thursday. US crude rose $2.28 to settle at $97.43 a barrel, having moved back above the front-month 200-day moving average of $93.76 after an earlier slip to $93.55.
"Today's oil trade hitched a ride on the strong rebound in the euro and US stock market," Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois, said in a note. "An additional feature was provided by the unwinding of the Brent-WTI spread positions ahead of Thursday's August Brent expiration," he added. US crude trading volumes outpaced Brent, but both were on track to finish just below or near their 30-day averages.
"(US crude) had a bounce off the 200-day moving average and the S&P 500 (index) has held above the 1,300 level, helping (US) crude bounce," said Robert Yawger, senior vice president, energy futures at MF Global in New York. Also supportive for oil, the US Energy Information Administration said in a monthly report that it expects global oil markets to tighten through next year, despite the International Energy Agency's release of crude from strategic reserves. Despite the EIA's expectations about tighter supply-demand balance, both Opec and the EIA cut demand growth forecasts for 2011 and 2012.
Opec, in its monthly report, lowered its oil demand growth forecast for 2011 and said a fragile global economy is likely to keep demand growth lower in 2012 than the current year. Brent's bounce was curbed by news that Royal Dutch Shell lifted a force majeure on its Nigerian Bonny Light crude oil loadings declared June 13 because of leaks and fires on its Trans-Niger Pipeline.
Oil's recovery and the dollar's weakness came after crude slumped early on concerns about the outlook for global demand reinforced by fears that politicians will be powerless to stop the debt crisis in Europe from spreading to Italy and Spain. European Union leaders will hold an emergency summit on Friday after finance ministers acknowledged for the first time that some form of Greek default may be needed to cut Athens' debts and stop the crisis from spreading.
Investors will get the first weekly snapshot of US oil inventories later on Tuesday when the American Petroleum Institute's report is released at 4:30 pm EDT (2030 GMT). US crude oil inventories were expected to have fallen last week, by 1.8 million barrels, according to an expanded Reuters survey of analysts on Tuesday.