Oil steadies on higher US demand, weaker dollar

Oil prices closed steadily on Tuesday after recovering from a near three-week low, attracting support from the intraday weaker US dollar and on data showing that US demand for crude and petroleum products rose in November.

The more active second-month Brent contract settled at $85.51 per barrel, up $1.09 or 1.29%, while the WTI crude futures settled at $79.21 per barrel, up $1.34 or 1.74% at the time of writing.

More volatility on the day of expiration kept the front-month contract under pressure as traders closed positions. 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 Tuesday‘s weaker US dollar. 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.