Brent oil fell by more than $1 on Tuesday and U.S. oil reversed an early rise, pressured by the specter of the U.S. Federal Reserve tapering its monetary stimulus program.
Brent futures for January lost nearly $1 to dip under $109, after settling $1.64 higher on Monday, its biggest daily gain in two weeks. U.S. crude futures gave up early gains, falling 26 cents to settle at $97.22, after a new round of data fanned the flames of Fed speculation.
The Fed's policy-making Federal Open Market Committee is meeting on Tuesday and Wednesday during which officials could decide to trim the Fed's $85 billion asset purchasing program, should they interpret recent strong U.S. economic data to mean the economy is recovering.
Scaling back the program could boost the dollar and weigh on dollar-denominated commodities, including oil, and indirectly curb investment flows into those markets. Traders also sold Brent to take profit after prices gained 1.5 percent in the previous session on the back of continued unrest in Libya, which curtailed oil supply.
Trading volumes were thin on Tuesday and were expected to remain so as many hedge funds have closed their books for the year and a pre-holiday market lull sets in, analysts said. U.S. oil got a slight boost on expectations that inventory data on Tuesday and Wednesday would show a draw in stockpiles.
For more information on commodities markets, please click here.