Oil prices were mixed in choppy trading on Tuesday, as sufficient supply and concerns about the pace of the U.S. economic recovery and the euro zone economy offset any support from the prospect of stronger demand in Asia.
U.S. gasoline futures posted the biggest percentage drop in the oil futures complex, pushing below the 50-day moving average of $3.0477 a gallon, a technical level closely monitored by chart watching traders and analysts.
U.S. crude had posted the deeper losses early on Tuesday as recent pipeline problems curbing the ability to move crude oil out of the Midwest to the U.S. Gulf Coast raised expectations inventories in the United States will increase.
U.S. light sweet crude prices have recently increased and the price difference to Brent narrowed, because of increased ability to move rising crude supply out of the Midwest to the Gulf Coast refining center.
"The market has no clear leadership right now," said Olivier Jakob, an analyst at Petromatrix in Zug, Switzerland. "Both crudes are under pressure, and the economic situation in Europe still looks pretty lousy."
Saudi Oil Minister Ali Al-Naimi said on Monday that demand for crude from Saudi Arabia is likely to rise over the coming months, in a sign the OPEC heavyweight sees a recovery in its biggest export market, Asia.
The Brent/U.S. crude spread was narrower near $13.35 a barrel, also in choppy trading, after widening to $14.66 earlier in the session.
Gasoline futures were down 7.65 cents at $3.0250 a gallon, having fallen as low as $3.0199.
While gasoline futures fell, U.S. heating oil rose more than a penny, as the benchmark distillate futures contract continued to attract buyers after the jumbo 4.5-million-barrel drop in stockpiles reported by the Energy Information Administration (EIA) for the week to March 22.
The EIA's report that refinery capacity use jumped 2.2 percentage points in the same week had some brokers and traders expecting refined products production to rise in coming weeks.
A stronger dollar added pressure on dollar-denominated oil prices, with the euro getting pressured by euro zone data showing the region was well into economic contraction last month.
British manufacturing also remained in contraction, and European Union (EU) data showed unemployment in February was steady at 12 percent.
The gloomy data from Europe followed Monday's report that U.S. factory activity grew at its slowest rate in three months in March, indicating a loss of momentum at the end of the first quarter.
Investors await Friday's closely watched U.S. March nonfarm payrolls report for an indication if the headwinds from a tighter fiscal policy, the sequestration or automatic spending cuts, have slowed the economy of the No. 1 global oil consumer.
PEGASUS WINGS CLIPPED
Exxon Mobil continued efforts to clean up thousands of barrels of heavy Canadian crude oil spilled in Arkansas after the rupture of a near 65-year-old pipeline.
The Pegasus pipeline, which can carry more than 90,000 barrels per day (bpd) of crude to Texas from Illinois, was shut Friday after the leak.
Arkansas has launched an investigation into the pipeline leak, with the company saying it will cooperate fully.
With the pipeline problem likely to keep crude oil bottled up in the region, analysts are expecting U.S. crude inventories to have risen last week, according to a Reuters survey, adding to stockpiles already above 385 million barrels.
The American Petroleum Institute's weekly inventory report is due at 4:30 p.m. EDT (2030 GMT) on Tuesday, with the EIA report following on Wednesday at 10:30 a.m. EDT (1430 GMT).