U.S oil rose by nearly $1 on Tuesday as traders squared positions amid some signs of strength in the U.S. economy, while Brent fell as incremental increases in Libyan oil supply and expectations that Iranian crude will return to market weighed on prices.
U.S. oil's rise narrowed its discount to Brent by $2 from a peak of more than $15 on Monday.
Traders bought contracts to square futures and options positions ahead of the U.S. February oil contract's expiry on Jan. 21. There will be no floor trading on the New York Mercantile Exchange and no settlement will occur on Monday, Jan. 20, due to the Martin Luther King Jr. holiday. Upbeat retail sales data helped support U.S. oil futures while the expectation for the first build in oil inventories in seven weeks curbed buying.
The premium of North Sea crude, the grade that underpins the Brent oil futures contract, to Brent rose by $1 and forced higher all related oil prices on Monday. Concerns over Libyan and North Sea supply united with refinery demand and buying from commodity trader Trafigura to drive up prices.
Oil inventory data due on Tuesday and Wednesday is expected to show an increase in oil stocks for the first time in seven weeks. Stockpiles of distillate and gasoline were expected to have dramatically increased for a second week in a row, according to a Reuters poll of analysts.