Brent crude edged higher while U.S. crude slipped on Tuesday as disappointing U.S. data reined in prices that had surged on hopes that Greece can reach a debt deal and on a European Union move toward budget discipline.
Iran completed a round of talks with U.N. nuclear inspectors, termed "constructive" in the semi-official Fars Iranian news agency, softening support from concern that U.S. lawmakers preparing a vote on more sanctions might trigger a supply disruption.
Expiring February U.S. gasoline and heating oil futures settled higher, supported by the threat of a U.S. refinery workers' strike. Contract talks continued ahead of a midnight Wednesday deadline that could to shut 6 percent of U.S. refining capacity.
Global equities, the euro and oil and copper all initially gained after Greek Prime Minister Lucas Papademos raised hopes of a deal this week to avoid a debt default and Luxembourg's Finance Minister Luc Frieden said Greece and private creditors were close to a debt deal.
"We've heard this out of Greece and the euro zone before and after the weak U.S. data it just wasn't enough to keep oil at the early highs," said Dan Flynn, analyst at PFGBest Research in Chicago.
Wall Street equities and oil prices felt pressure from data showing U.S. home prices fell more than expected in November, consumer confidence soured in January and growth slowed in the Midwest in January.
Brent March crude rose 23 cents to settle at $110.98 a barrel, ending back under Brent's 20-day and 200-day moving averages after jumping $3.15 to an intraday peak of $113.90.
Brent rose 3.35 percent in January, after slumping in December, the strongest monthly percentage rise since gaining 6.6 percent in October, according to Reuters data.
Brokers said Tuesday's early volatility and part of the $3 jump resulted from computer-driven trading, with a surge in volume when the Brent market went through a key buying level, triggering a large buy order.
U.S. March crude fell a third straight session, slipping 30 cents to settle at $98.48 a barrel, after jumping to $101.29. For the month, U.S. crude dipped 35 cents, or 0.35 percent.
IRAN'S NUCLEAR DISPUTE
Market players remained focused on the dispute between Iran and the West over Tehran's nuclear program and whether it is being used to make atomic weapons.
Iran's completed talks with the U.N.'s International Atomic Energy Agency inspectors started Saturday and an unnamed source quoted by the Fars news agency said the two sides agreed to continue talks.
The U.S. CIA director told a Senate committee on Tuesday that rival OPEC-member Saudi Arabia's oil production appears to be ramping up and can fill some of the shortfall caused by sanctions on Iranian exports. Also, current sanctions appear to be biting much more in recent weeks.
The U.S. Senate Banking Committee plans to vote on a new round of sanctions targeting Iran's energy sector. The package comes on the heels of new banking sanctions that the Obama administration is only beginning to implement as well as tough new embargos by European nations.
"Iran will make sure we see more upside than downside," said Jeremy Friesen, a commodity strategist at Societe Generale.
U.S. OIL INVENTORIES
U.S. crude oil inventories were expected to have increased last week, a Reuters survey of analysts showed.
Distillate stocks were expected to be lower and gasoline inventories higher, the survey said.
U.S. retail gasoline demand, while up a fraction of a percent last week versus the previous week, was down 5.5 percent compared to the year-ago period as pump prices hovered near record January highs, according to a MasterCard report.
The industry group American Petroleum Institute releases its weekly inventory report at 4:30 p.m. EST on Tuesday, with the government's report following on Wednesday morning.
(Additional reporting by Gene Ramos in New York, Christopher Johnson in London and Florence Tan in Singapore; Editing by David Gregorio and Bob Burgdorfer)