Oil was steady above $82 today after hitting the highest level in almost two weeks a day earlier on optimism about the global economic recovery.
US crude for May delivery slid 2 cents to $82.15 a barrel at 0342 GMT, while Ice Brent rose 3 cents to $81.20 in London.
Prices have traded in a range between $69 and $84 this quarter, touching $82.78 yesterday, the highest intra-day price since 18 March.
A falling dollar yesterday boosted the purchasing power for the dollar-denominated commodities outside the US, reflecting the usual inverse correlation between the US currency and oil.
However, oil prices failed to react to further dollar weakness today, while Japanese industrial production fell for the first time in 12 months, raising some concern about the pace of recovery in OECD economies.
"A weaker US dollar will normally be helpful to the oil price, but at the top of the established trading range for the past month there has been hesitancy on the part of buyers," said David Moore, Commodity Strategist at the Commonwealth Bank of Australia in Sydney. "They are becoming more cautious."
"Recent trading ranges create expectations. When the price gets close to the top, it falls back again. The market is not especially tight and the fundamentals that would underpin a sustained rise are not really in place," Moore said.
US crude inventories probably climbed by 2.6 million barrels last week, posting their ninth consecutive weekly increase, a Reuters poll showed yesterday.
The American Petroleum Institute (API) will publish stockpile data gathered from industry players later today, while government statistics from the Energy Information Administration (EIA) will follow on tomorrow.
US gasoline stocks were projected to be down by 1.7 million barrels, with distillate stocks, which include heating oil and diesel, down by 1.4 million barrels, according to the poll.
The drop in US product inventories may accelerate in the second half of the year, Moore said, setting the stage for higher prices above $90 a barrel next year.
Oil in floating storage has dropped 24 million barrels from its peak in November 2009, Goldman Sachs said in a report dated March 29.
"We expect the supply-demand balance to continue to tighten in 2010 as the global economic recovery continues to strengthen demand, draw inventories and draw Opec spare capacity back into the market," Goldman analysts led by Jeffrey Currie said in the report.
