Crude oil prices on both sides of the Atlantic ended with moderate gains on Tuesday, supported by a stock market advance and worries over Egypt. But gains were limited by a strong U.S. dollar and supplies were brought back online.
Spread trading trumped trading in the straight oil contracts, which were lackluster in thin volume, one analyst said.
The spread between the U.S. August and September oil contracts widened by some 30 cents to a high of 57 cents after Tuesday's settlement. This helped further backwardation on the oil price futures curve, seen when prompt-month prices are higher than those further along the curve.
The spread narrowed some 10 cents after the American Petroleum Institute released data showing crude inventories fell by 9 million barrels, compared with expectations for a 3.3 million barrel draw.
Front-month U.S. crude oil futures rose more than $1 per barrel to a high of $104.76 after the data's release.
On Wednesday, the U.S. government will release its inventory report.
Fears that violence in Egypt could ignite conflict in the broader Middle East, which pumps a third of the world's oil, continued to lend support to oil prices.
While oil prices had shaved some gains, Brent was still hovering at a three-month high and U.S. crude at a 14-month high.
"The majority of last week's near $5 gain is on the back of geopolitical risk premium," said Gene McGillian, analyst with Tradition Energy in Stamford, Connecticut.
The U.S. dollar index hit a fresh three-year high against a basket of currencies, creating headwinds for oil prices. A good start to the U.S. earnings season underpinned equities, which supported crude oil prices.
Commodities priced in dollars become more expensive for holders of other currencies as the dollar strengthens, weakening demand.
The spread between U.S. gasoline futures and heating oil had narrowed to its smallest point in one month, reflecting the need for traders to square positions after the previous session, Walter Zimmermann, chief technical analyst for United-ICAP, said.
The spread between U.S. gasoline futures and heating oil had narrowed to a near one-month high, reflecting the need for traders to square positions after the previous session, Walter Zimmermann, chief technical analyst for United-ICAP, said.
On Monday, gasoline futures rallied to seven-week high while heating oil hit a more than three-month high at $3.00 a gallon.
"RBOB really got hit hard relative to distillate yesterday but has gained all of it back," Zimmermann said. Gasoline futures were 0.88 percent higher, and heating oil was flat.
The spread between global benchmark Brent crude oil and U.S. benchmark West Texas Intermediate had leveled out to around $4.15 to $4.30 per barrel after narrowing to $3.09 last Wednesday.
Improved supply from elsewhere in the Middle East helped push Brent oil prices lower for now. Libya's Sharara oilfield will resume operations, and the flow of crude from Kirkuk in Iraq to the port of Ceyhan in Turkey will resume in two to three days after being interrupted for weeks due to a pipeline leak.
In the United States, traders awaited supply inventory data that is expected to show a decline in crude oil stocks.
The Energy Information Administration slightly tightened its 2014 oil demand outlook but left the balance of 2013 unchanged.