Oil prices clung to modest gains on Tuesday after a swift early rally fuelled by a bullish global demand forecast and new concerns over Libyan oil exports succumbed to profit-taking.
A sharp mid-afternoon retreat in U.S. ultra low-sulfur diesel futures (ULSD), which had rallied by as much as 5 percent last week, also helped pare oil's gains, even as snowstorms blanketed the U.S. East Coast.
Volatile U.S. stock market trading and a poll showing analysts are predicting a rise in crude oil inventories for the first time in eight weeks added to the pull-back.
Prices kicked higher earlier Tuesday after the International Energy Agency (IEA) said that world oil consumption would rise by 1.3 million barrels per day (bpd) in 2014, more quickly than previously expected.
"The main feature today is the support from the IEA report we saw this morning," said Dominick Chirichella, senior partner at Energy Management Institute.
Brent crude settled 38 cents higher at $106.73 a barrel after rising earlier in the session to $108 per barrel.
Front-month U.S. February crude, which expired at the close of trade, ended 62 cents higher at $94.99. U.S. crude oil for March delivery, which will become the front-month contract Wednesday, rose 37 cents to $94.97.
There was no settlement on Monday on the New York Mercantile Exchange due to a U.S. holiday.
The Brent-WTI spread <CL-LCO1=R>, which traded as tight as $11.16 on Friday, widened to settle at $11.76.
ULSD settled 0.1 percent lower at $3.0147 a gallon, after racing as high as $3.0834 a barrel in advance of the snowstorm and cold front that could boost heating fuel demand.
"Heating oil was overbought and fell back on some of its profit-taking," said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.
STOCK BUILD SEEN
U.S. equities mostly rose Tuesday in volatile trading that ended with the S&P 500 on pace to snap a two-session decline thanks to a material stocks rally, though the Dow fell on disappointing earnings by three of its components.
Analysts in a Reuters poll taken ahead of Wednesday's American Petroleum Institute inventory report predicted gasoline stocks increased 1.6 million barrels last week. However, the same analysts forecast a 400,000 barrel draw on distillates, including heating oil and diesel.
Weekly oil inventory data will be released a day late due to the Monday holiday. The API will release its data at 4:30 p.m. EST (2130 GMT) on Wednesday. The U.S. Energy Information Administration will release its data at 11 a.m. EST (1600 GMT) on Thursday.
Brent was also boosted by news from Libya that five officials, including the oil minister, resigned, citing the prime minister's inability to "provide security...in the electricity and oil sectors,"
The announcement came after Libyan prime minister vowed on Sunday to recover important oil ports from protesters who have controlled them since summer.
Oil received more support from an increase in risk appetite across the market after the People's Bank of China dumped more than 255 billion yuan ($42 billion) into the financial system, easing concerns about a credit crunch that could hamper growth in the world's second-biggest economy.
Uncertainty in South Sudan also supported Brent as insurgents disputed the South Sudan president's claim that his soldiers retook the capital of the oil-rich Upper Nile region.
Iran meanwhile agreed to a preliminary deal that stops its nuclear operations, raising prospects the OPEC member will eventually increase oil exports, which curbed gains in Brent oil.
(By Elizabeth Dilts; Additional reporting by Simon Falush in London and Manash Goswami in Singapore; Editing by Anthony Barker, Peter Galloway and Meredith Mazzilli)