Oil prices rose for the fifth straight session on Tuesday, after U.S. Federal Reserve Chairman Ben Bernanke left the door open for more monetary stimulus but gave no signal on whether the Fed was closer to such a move.
Trading was choppy and both Brent and U.S. crude bounced back as tensions involving Iran's dispute with the West over Tehran's nuclear program, along with recent North Sea supply interruptions, provided support to oil.
Bernanke repeated the Fed's pledge to act if needed, even while offering no new clues on when or how the central bank might offer extra support to the U.S. economy.
Financial markets had hoped for signs the Fed was moving closer to a third round of bond purchases, also known as quantitative easing or QE3.
"It's post-Bernanke buying because, while he was not explicit about doing something, the door is clearly open," said John Kilduff, partner at Again Capital LLC in New York.
The euro recovered from losses against the U.S. dollar and U.S. stocks pushed higher after both initially fell back when Bernanke's testimony quelled hopes for quick Fed action after recent moves by central banks in China and Europe to bolster a sputtering global economy.
Brent September crude rose 63 cents to settle at $104 a barrel, swinging from $102.77 to $104.75.
U.S. August crude pushed up 79 cents to settle at$89.22 a barrel, having fallen to $87.41 before reaching the $89.46 intraday peak after the initial Bernanke-induced slump.
August crude options expire on Tuesday ahead of the August contract going off the board on Friday.
"The Iranian uncertainty and the North Sea problems are keeping oil supported, but I don't think those factors will last that long," said Mark Waggoner, president at Excel Futures Inc in Bend, Oregon.
Total crude trading volumes for Brent and U.S. futures topped a half million lots traded, but Brent turnover still lagged its 30-day average by 23 percent.
U.S. heating oil futures bounced back up along with crude futures. But U.S. gasoline futures ended nearly a penny lower at $2.8450 a gallon, having retreated after testing above the 200-day moving average of $2.8675.
Returning refinery units expected to improve supply and lower differentials in the New York Harbor market helped keep gasoline futures from rallying back, traders said.
Production problems last week in the Buzzard field and an earlier strike by Norwegian oil workers are expected to push North Sea exports for 12 key grades to a 2012 low in August.
OPEC-member Angola's crude oil exports in September are set to fall by 300,000 barrels per day (bpd) to the lowest since June 2011, a preliminary loading schedule showed.
Weekly oil inventory reports are expected to show U.S. crude stockpiles fell last week, a Reuters poll of analysts showed.
Crude stocks fell substantially in the week to July 6, by 4.7 million barrels, according to the Energy Information Administration.
Data from industry group the American Petroleum Institute is due at 4:30 p.m. EDT (2030 GMT) on Tuesday.
IRAN WILD CARD
With the European Union's embargo and tightening U.S.-led sanctions hampering exports and depriving Iran of revenue, China is increasing oil imports to a record high to help Tehran arrest its export slide, according to what Geneva-based consultancy Petrologistics said was a preliminary report.
U.S. Secretary of State Hillary Clinton said on Monday the United States and Israel were "on the same page" in their determination to prevent Iran from achieving what the West fears is its goal of building a nuclear weapon.
World powers and Iran have had several rounds of talks attempting to resolve the dispute.
Oil prices jumped on Monday in reaction to news that a U.S. Navy vessel off the United Arab Emirates fired on a fishing boat that did not heed warnings, reminding investors just how volatile the situation in the region can be.