“Brent crude futures edged up on Tuesday in choppy trading as OPEC production declines and a weaker dollar lent support to oil ahead of OPEC's policy meeting this week and the latest snapshots on oil inventories in the United States.

Brent crude headed for a second straight higher settlement while seesawing U.S. crude futures struggled to avoid a sixth straight slip. The turmoil in the Middle East kept intact oil's geopolitical risk premium related to fears about the potential disruption of the region's oil supplies.

The dollar index was pressured as the euro rose and investors positioned themselves at the start of the U.S. Federal Reserve's two-day policy meeting, with some speculation the Fed could signal more aggressive quantitative easing in the near term.

Brent crude futures last rose 0.3 percent to around $107 a barrel, having swung from $107.09 to $108.34.

The Brent January contract expires on Friday and with three weeks of trading left in 2012, front-month Brent prices need to finish above $107.38 to post a gain for 2012.

U.S. light, sweet crude futures were down 0.1 percent at about $85 a barrel, having reached $86.37. U.S. crude is on track to end the year down around 13 percent from its 2011 close at $98.83.

Brent's premium to U.S. crude increased on Tuesday, moving above $22 a barrel.

Oil prices continue to be buffeted by economic headlines that often can point to different near term trends.

Crude futures received a boost from news of a sharp rise in German analyst and investor sentiment in December. Sentiment moved into positive territory for the first time since May, lending support to optimism concerning the outlook for oil demand in the euro zone's largest economy.

The Mannheim-based think tank ZEW said its monthly poll of economic sentiment jumped to 6.9 points from -15.7 in November.

Data on Tuesday showed the U.S. trade deficit widened in October as exports suffered the biggest drop in nearly four years, indicating slowing global demand was spilling over into the lackluster U.S. economy and helping hem in oil prices.

The trade data arrived and the Federal Reserve policy meeting convened against the backdrop of negotiations between the White House and House of Representatives on a budget deal to avoid looming mandated tax hikes and spending cuts, the so-called fiscal cliff.

Investors fear that if the tax increases and spending cuts now set for 2013 are not averted, the U.S. economy could be pushed back into recession.

OPEC to Meet

While noting concerns about oversupply, the Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report its production in November fell 210,000 barrels per day (bpd) to 30.78 million bpd. Top exporter Saudi Arabia told OPEC it cut output by 230,000 bpd to 9.49 million bpd.

OPEC left its 2013 world demand growth forecast unchanged at 770,000 bpd, while the U.S. Energy Information Administration (EIA), in a separate report on Tuesday, raised its 2013 expectations by 70,000 bpd to 960,000 bpd.

Traders will be monitoring any changes in OPEC production targets as the group meets in Vienna on Wednesday, the same day the U.S. EIA will release its report on domestic oil inventories.

The industry group American Petroleum Institute will release its inventory data on Tuesday at 4:30 p.m. EST.

U.S. crude oil stockpiles are expected to have fallen last week, while distillate and gasoline stockpiles increased, a Reuters survey of analysts showed.”

http://www.cnbc.com/id/100298104