Oil prices rose after a choppy start on Tuesday, supported by a weak dollar even as markets were buffeted by the continuing stalemate over the US debt ceiling that weighed on Wall Street.
US crude prices briefly jumped back above USD 100 a barrel to a six-week high after seesawing with Brent, testing technical resistance and support. Before the midday rally, oil gave up earlier gains near the start of open outcry trading in New York as US stock futures turned lower. Equities later fell at the open.
Low trading volumes contributed to the volatility, brokers and analysts said.
"US crude found support among technical traders, with support coming in at USD 98. Small buyers are going in, but the big ones are still biding their time," said Richard Ilczyszyn, senior market strategist at Lind-Waldock in Chicago.
Brent September crude rose 62 cents to USD 118.56 a barrel by 1:54 pm (1754 GMT), trading from USD 116.53 to USD 119.05.
US September crude rose 70 cents to USD 99.90 a barrel, having traded from USD 97.76 to USD 100.62, highest since prices reached USD 102.15 on June 10.
Both US and Brent total crude futures trading volumes were on pace to surpass Monday's volumes, but remained well below their 30 day averages.
Dollar slumps
The dollar hit a record low against the Swiss franc, a traditional safe haven, and it also dropped to a four-month trough versus the yen and a three-week low versus the euro.
A weak dollar can support dollar-denominated oil by making it less expensive for consumers using other currencies and by luring yield-hungry investors to commodities markets.
A speech by US President Barack Obama on Monday gave no sign of a breakthrough in deadlocked talks to raise the US debt ceiling in time to beat the August 2 deadline.
US stocks faced headwinds from the ongoing stalemate in Washington over the debt ceiling, with light volume indicating gridlock has made investors nervous.
The Commerce Department said on Tuesday the median sales price for US single family homes increased 5.8% in June from the previous month and was up 7.2% from June 2010, according to the Commerce Department. But sales slipped and analysts said firming prices would likely be short-lived given the huge supply of homes on the market.
More supportive for oil was the Conference Board's index of consumer attitudes rising to 59.5 from 57.6 in June, beating economists' expectations for a reading of 56.0.
US oil inventories
US crude stocks were expected to have fallen last week, while products stockpiles rose, a Reuters survey of analysts on Monday showed.
Industry group the American Petroleum Institute will release its oil inventory data on Tuesday at 4:30 pm EDT (2030 GMT). The government's inventory report from the US Energy Information Administration follows on Wednesday at 10:30 am EDT (1430 GMT).
Maintenance on the Mars oil platform has cut medium sour crude output in the Gulf of Mexico, a Valero Energy Corp executive said in a conference call.
Mars platform operator Royal Dutch Shell did not immediately respond to a request to confirm the Valero information.
