Brent crude oil prices fell on Tuesday after a global energy watchdog described world supplies as "comfortable" and analysts forecast a continued build in the U.S. crude inventory, while gasoline rose 1 percent on expected inventory draws ahead of the summer driving season.
U.S. crude prices tumbled further late in the trading session, following news that an outage on TransCanada's 590,000-barrel-per-day Keystone oil pipeline would be resolved by Tuesday.
Earlier in the session, strong U.S. equity markets helped support U.S. crude.
U.S. crude's slide allowed Brent to regain some of its premium to the U.S. crude oil after it had earlier narrowed to the lowest level since 2011.
Brent crude oil fell 22 cents to settle at $102.60 per barrel, after trading largely within a $1 range. U.S. crude settled down 96 cents at $94.21 per barrel.
U.S. crude oil inventories were expected to rise by 200,000 barrels for a fourth straight week, although gasoline stocks were expected to fall, according to a Reuters poll of eight analysts.
U.S. gasoline was up most of the day, ahead of the U.S. Memorial Day holiday, considered the start of the U.S. summer driving season.
Trading volumes were light, with U.S. crude volumes 23 percent below the 30-day moving average and Brent volumes 19 percent below the 30-day moving average.
The International Energy Agency (IEA) said rapidly increasing non-OPEC oil output would meet most of the world's extra oil demand over the next few years and it also forecast a production increase from OPEC of 200,000 barrels per day, largely from Iraq.
Tim Evans, energy specialist at Citi Futures Perspective in New York, wrote in a research note that increased supply "will weigh on prices absent more end-use consumption."
The closely followed German ZEW think tank said on Tuesday its monthly poll of economic sentiment rose to 36.4 points from 36.3 in April, indicating a smaller-than-expected improvement due to the weakness of the euro zone economy.
"The oil market is just grappling with the underlying economy," said John Kilduff, a partner with Again Capital in New York.
North Sea Brent held a near $20 premium for much of 2012 over WTI, but the spread has narrowed steadily to less than $8. It has traded largely below $10 for the last 12 sessions, reaching a 2013 low of $7.20 on Tuesday before settling at $8.39.
The completion of pipeline projects such as the Permian Express, Longhorn and West Texas Gulf Expansion is expected to help drain some stocks out of the U.S. Midwest and to refineries.
A stronger dollar also weighed on oil prices. A firm dollar makes commodities priced in the greenback more expensive for holders of other currencies.
On Tuesday at 4:30 p.m. EDT (2030 GMT), the American Petroleum Institute will release its weekly inventory reports. On Wednesday at 10:30 a.m. EDT (1430 GMT), the U.S. Department of Energy's Energy Information Administration will release its more closely-watched inventory report. (Additional reporting by Christopher Johnson in London, Manash Goswami in Singapore; Editing by David Gregorio and Bob Burgdorfer)