NEW YORK Brent crude rose on Tuesday in choppy trade as tensions over Iran reinforced the geopolitical fear premium and concerns about slowing global economic growth pressured U.S. oil prices.
Brent and U.S. crude posted early gains on heightened tensions between the United States and Iran as world leaders took turns addressing the United Nations in New York this week.
"President Obama is being more aggressive on Iran and the Iranians testing missiles brings the geopolitical premium back in the market," said Phil Flynn, an analyst at Price Futures Group in Chicago.
Crude futures received support from the early strength of the euro and weaker dollar and from reports showing improving U.S. consumer confidence and rising home prices.
The euro faded and fell against the dollar as investors grew cautious about developments in debt-plagued Spain, where protesters clashed with police in the country's capital as the government prepared a new round of austerity measures.
U.S. equities fell, giving up early gains, with the S&P 500 suffering its worst day since June, as Caterpillar Inc (CAT.N) cut it profit outlook. .N
Brent November crude rose 64 cents to settle at $110.45 a barrel, having traded from $109.44 to $111.47.
Brent's drop to $108.78 in Monday's session was still well above Brent's six-week low of $107.10 hit last Thursday.
Brent's rally stalled just 4 cents above the 50-day moving average of $111.43, a level watched by traders, without challenging another closely watched technical point, the 200-day moving average at $111.94.
"The (oil) market looks tired. It was really up on air earlier," said Andy Lebow, vice president at Jefferies Bache.
"The consumer confidence number was quite good but that's just one data point in what looks to be a weakening economy."
U.S. November crude fell a second straight session, dropping 56 cents to settle at $91.37 a barrel after reaching$93.20. But prices fell to $90.57 in post-settlement trading, the lowest price since front-month U.S. crude dropped to $87.23 on August 3.
Brent and U.S. crude futures jumped to four-month peaks on September 14, the day after the U.S. Federal Reserve launched its latest monetary stimulus program.
But oil prices lost ground last week as investors worried that demand for petroleum would be hit by the economic problems that led the Fed and central banks in Japan and Europe to act to bolster the global economy.
"The oil market remains caught between supply risks and the prospect of fresh liquidity from the central banks on the one hand, and plentiful supply and growing economic concerns on the other," Commerzbank oil analyst Carsten Fritsch said.
U.S. crude oil stocks rose 335,000 barrels last week, the American Petroleum Institute said on Tuesday, slightly less than the build of 900,000 barrels expected. <API/S>
Gasoline stocks rose 112,000 barrels, while distillate inventories fell 483,000 barrels, the API said.
Stockpiles of gasoline were expected to be up 200,000 barrels and distillate stocks were seen up 800,000 barrels, a Reuters survey of analysts showed. <EIA/S>
The U.S. Energy Information Administration's inventory report will follow on Wednesday at 10:30 a.m. EDT (1430 GMT).
U.S. heating oil futures settled nearly a penny higher on Tuesday, while RBOB gasoline gained nearly 5 cents, or 1.7 percent, as the front-month October contracts approach expiration on Friday.
U.S. President Barack Obama on Tuesday said the United States will "do what we must" to prevent Iran from acquiring a nuclear weapon and in the same speech at the United Nations accused Tehran of helping to keep a dictatorship in power in Syria.
Obama's remarks came a day after Iranian President Mahmoud Ahmadinejad said Israel had no roots in the Middle East and would be "eliminated".
Iran successfully tested a domestically made anti-aircraft system, its Press TV said on Monday, adding to uncertainty over the region.
(Additional reporting by David Sheppard and Adam Kerlin in New York, Peg Mackey in London and Ramya Venugopal in Singapore; editing by Jim Marshall, Chizu Nomiyama and Andrew Hay)