*
WTI, more active second-month Brent close 1% higher
*
Data from U.S. shows higher Nov. crude oil and fuels
demand
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Dollar index turns negative as inflation concerns ease
*
API shows U.S. crude, fuel stocks rose last week - sources
(Adds API data)
By Shariq Khan
BENGALURU, Jan 31 (Reuters) - Oil prices closed steady
on Tuesday after recovering from a near three-week low, drawing
support from a weakening dollar and on data showing that demand
for U.S. crude and petroleum products rose in November.
The more active second-month Brent contract settled at
$85.46 a barrel, up 96 cents or 1%, while the U.S. West Texas
Intermediate crude futures settled at $78.87 a barrel, up
97 cents or 1.3%.
More volatility on the day of expiration kept the
front-month contract under pressure as traders closed positions,
said Mizuho analyst Robert Yawger. The front-month contract
settled at $84.49 a barrel, down 41 cents.
During the session, front-month Brent and WTI futures
touched their lowest in almost three weeks as traders worried
about prospects for further interest rate increases and abundant
flows of Russian crude.
The Brent April futures and U.S. front-month WTI gained
after the U.S. Energy Information Administration reported that
demand for U.S. crude and petroleum products rose 178,000
barrels per day (bpd) in November to 20.59 million bpd, the
highest since August. Crude benchmarks were also supported by a weaker U.S.
dollar, UBS analyst Giovanni Staunovo said. This makes
dollar-denominated crude cheaper for foreign buyers.
The dollar index turned negative after U.S. data showed
labour costs increased at their slowest pace in a year in the
fourth quarter as wage growth slowed, bolstering expectations of
the Fed slowing its interest rate increases.
Investors expect the Fed to raise rates by 25 basis points
on Wednesday, with increases of half a percentage point by the
Bank of England and European Central Bank the following day.
An OPEC panel is likely to recommend keeping the group's
output policy unchanged when it meets on Wednesday, delegates
told Reuters on Monday.
However, Tuesday's weakness in front-month Brent prices may
cause concern in the group, Yawger said. This widened the
contango in the market, which occurs when futures prices show a
commodity's price is expected to be much higher in the future.
A Reuters survey shows 49 economists and analysts expect
Brent crude to average more than $90 a barrel this year, the
first upward revision since a poll in October, with gains likely
driven by demand from top consumer China.
After settlement, market sources said the American Petroleum
Institute reported that U.S. crude oil and fuel inventories rose
last week. The U.S. Energy Information Administration will
release official stockpiles data on Wednesday. Preliminary
numbers by the API indicated a 6.3 million-barrel increase in
crude stocks, which if confirmed by the EIA would be much higher
than the 400,000-barrel rise forecast by analysts in a Reuters
poll.
(Reporting by Shariq Khan; Additional reporting by Rowena
Edwards, Swati Verma, Trixie Yap
Editing by David Goodman, Will Dunham and David Gregorio)
