U.S. Crude Steady Ahead of Inventory Data

Benchmark Brent crude settled down on Tuesday on bets OPEC will not cut output to stem a supply glut when the world's biggest oil producers meet later this week, while U.S. crude steadied on expectations of a stockpile drop.

Expectations are high that Friday's meeting of the Organization of the Petroleum Exporting Countries in Vienna will choose to continue pumping crude at record levels to defend market share against non-member oil producers such as the United States and Russia.

The U.S. Labor Department's closely watched jobs data for November are also due on Friday. Stronger employment numbers could help the Federal Reserve decide on the first U.S. rate hike in nearly a decade, sending the dollar higher. That, and the likelihood of no OPEC cuts, could drive Brent below the $40-a-barrel mark, traders said.

"We see renewed selling after the OPEC meeting is defined since we expect oil balances to tilt further in a bearish direction amidst additional strengthening in the U.S. dollar," said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.

Brent settled down 17 cents, or 0.4 percent, at $44.44 a barrel.

U.S. crude's West Texas Intermediate futures finished the session up 20 cents at $41.85.

While U.S. crude was also under pressure from the global oversupply in oil, it could see some reprieve if inventory numbers for oil in storage across the United States turn out to be lower than expected.

A Reuters poll of analysts forecast on Tuesday that U.S. crude stockpiles possibly declined by 500,000 barrels last week.

American Petroleum Institute (API), a closely watched industry group, will issue its own stockpile report at 4:30 p.m. (2130 GMT), ahead of official inventory data on Wednesday from the U.S. Energy Information Administration.

Traders expect U.S. crude prices to rebound if API reports a stockpile drop beyond market expectations.

Both Brent and U.S. crude saw support earlier on Tuesday from a rally in U.S. gasoline, which rose as much as 6 percent, reacting to higher requirements for refiners to meet U.S. renewable fuel standards.

The rally came after the Environmental Protection Agency (EPA) on Monday raised previous targets for the amount of biofuels to be mixed into motor fuel for the three years to 2016.

A weaker dollar also limited the downside in oil. The dollar posted its biggest daily loss in nearly two weeks against a basket of currencies, making commodities denominated in the greenback, including oil, more affordable for holders of the euro and other currencies.

(By Barani Krishnan; Additional reporting by Jarret Renshaw in New York and Amanda Cooper in London; editing by Marguerita Choy, Diane Craft and Chizu Nomiyama)