LONDON: Oil rose on Tuesday, lifted by expectations that data would show inventories in the world's top consumer fell for a seventh week and supported by dollar weakness.
Further support came from a wider move by investors into the commodity complex as economic uncertainty undermined confidence in financial assets.
By 1127 GMT, Brent crude futures were up 94 cents at $116.99 after reaching a high of $117.16 while US light crude futures added $1.00 to $96.93 after hitting a peak of $97.09.
An expected fall in US stocks of oil is seen as keeping upward pressure on crude prices.
Inventories are likely to have fallen by 1.3 million barrels last week due to higher refinery utilization and a slide in imports, a Reuters poll showed ahead of weekly reports.
"Estimates that there's been a drawdown in gasoline are giving prices a bit of a boost, but we are really range trading after the weakness we saw the previous session," said Tony Machacek, futures broker at Jefferies Bache.
In the second-largest oil consumer China, refined oil product stocks at the end of June increased nearly 1 million tonnes from a year earlier.
They were at a normal level, after fuel consumption slowed down since mid-April, a government report showed on Tuesday.
The dollar softened versus the euro and a basket of currencies on Tuesday as the single currency regained some ground after losses in the previous session on worries that the euro zone debt crisis will worsen.
A weaker dollar makes oil and other commodities more affordable for holders of other currencies.
Debt problems on both sides of the Atlantic saw investors move into safer assets and helped gold to reach another record high.
Analysts said that oil was also a beneficiary of the reluctance to hold financial assets.
"There's a desire to hold something that has a physical reality as opposed to bonds and shares, that has the ability to keep its values when everything else falls," Christophe Barret, oil analyst at Credit Agricole Corporate and Investment Bank.
Highlighting the fragile state of the euro zone's economy and keeping investors wary of holding riskier assets, German analyst and investor sentiment fell more than expected in July to its lowest level since January 2009.
Figures from the Mannheim-based ZEW economic think tank showed its economic sentiment index fell to -15.1 from -9.0 in June, below the consensus forecast in a Reuters poll for a decrease to -12.4.
IEA WATCHED
Oil was also supported by expectations that the International Energy Agency (IEA) would not release emergency stocks for a second time.
This was because there was no sign yet of the kind of shortage to mandate another dip into the West's emergency oil reserves when a 30-day deadline for assessing the impact of a first release expires at the end of this week, traders and analysts said.
For another IEA release to take place, it would have to be endorsed by all 28 members of the energy consumer body. Germany and Italy are likely to resist any plans for a second release for now, a French government source told Reuters last week.
Oil has remained in a fairly tight range through July, but some price chart analysts see scope for upside potential with strong support near current levels.
"We would need to see a close below $115.39 for Brent, the 100 day moving average for further weakness, if this happens it could move down to the $113 area," said Lynnden Branigan, technical analyst at Barclays Capital.
"However the risk is to the upside, with resistance around the $118.90 area that we saw it peaking at last week."
Copyright Reuters, 2011
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