Oil held steady below $71 today, after sliding more than 2 per cent to a two-month low a day earlier on a hefty increase in US fuel stockpiles, as the weak dollar offered some support.
Traders are also watching the bearish impact of Saudi Arabia's move to restore full term crude supply to two Asian buyers, ahead of Opec's December 22nd meeting, at which most members have said they would not raise production targets.
US crude for January delivery rose 8 cents to $70.75 a barrel by 0643 GMT, after losing almost $2 for its sixth straight day of losses yesterday, when it hit the lowest since early October at $70.13.
London Brent crude gained 20 cents to $72.59.
"A lot of investors are getting out of the high-liquidity markets like gold and crude," said Ken Hasegawa, a commodity derivatives sales manager at broker Newedge in Tokyo.
"It's tough for crude to go higher this month because everyone is moving to close their positions by the end of the month. But early next year, money will be coming back to the exchanges and commodities will rise gradually.
US Energy Information Administration (EIA) data showed that distillate stocks, which include heating oil and diesel, rose last week by an unexpected 1.6 million barrels, versus forecasts for a 600,000-barrel drop, reflecting persistently poor demand in the world's largest oil consumer during winter.
Gasoline inventories rose 2.2 million barrels, above projections of a 1.5 million-barrel build.
The 3.8-million-barrel drawdown in crude stockpiles as refiners raised production was shrugged off as the government figures lagged the 5.8-million-barrel drop shown in separate industry data on Tuesday.
"Stock levels at Cushing have been rising. That is a bearish factor," Hasegawa added.
The EIA said crude stocks at Cushing, Oklahoma, the delivery point for NYMEX crude oil futures, were up last week by 2.5 million barrels at 33.4 million barrels.
"While we are still shy of the near 35 million-barrel peak in February this year, the pressure on spreads remains and the contango in the WTI forward curve can stand to widen," BNP Paribas said in a report.
Even as Ecuador and Kuwait echoed remarks by Opec peers that the cartel would not raise output at its Angola meeting, Saudi Arabia boosted supplies for January to at least two buyers in Asia after cuts of 5-7 per cent for December, and kept full volumes to six others.
The world's top oil exporter last month had allocated full contracted volumes for the first time in a year for December to many Asian customers and raised supply to oil firms with global systems by 5-10 per cent from November.
Oil had rallied to a high for the year of $82 in October, from below $33 last December and prices inched up today largely due to the weaker US currency.
The US dollar retreated after this week's recovery, with the New Zealand and Australian dollars leading demand for higher-yielding and commodities-linked currencies after much stronger than expected Australian jobs data.
The dollar was steady against a currency basket in later trade.
The weaker greenback makes dollar-denominated commodities cheaper for holders of other units, and also lifted gold above $1,130 an ounce today after hitting its lowest in more than three weeks the previous day.
Reuters