Crude oil prices rose on Monday against a weaker dollar, but ample oil supplies limited gains, even as equity markets hovered at record levels.
The dollar extended losses against the euro as foreign exchange traders let up on expectations Federal Reserve Chairman Ben Bernanke would hint at cutting back on U.S. bond purchases.
"The dollar's move has been pretty strong lately, maybe you're seeing a little more profit taking," said Gene McGillian, an analyst with Tradition Energy in Stamford, Connecticut.
The U.S. dollar fell 0.6 percent to 83.764 against a basket of six currencies. Crude oil prices are denominated in U.S. dollars and when the value of the currency sinks, prices tend to rise to offset the weakness.
MSCI's all-country world equity index rose 0.51 percent to its highest since June 2008.
"Although the energy complex is still encountering a mix of both bullish and bearish macroeconomic drivers, it now appears in a mode in which it is picking and choosing, while prioritising bullish rather than bearish movers," Jim Ritterbusch, president of Ritterbusch Associates in Galena, Illinois, said in a report.
"Today's new all-time highs in the stock market kept speculative flows largely concentrated on the buy side."
Brent crude for July edged up above $105 per barrel, hitting a high of $105.31 during the session, but was unable to hold its gains. Brent settled 16 cents higher at $104.80 per barrel, breaching the 50-day moving average.
U.S. crude futures for June delivery, which expire at the end of trading on Tuesday, ended the day up 69 cents or, 0.72 percent, at $96.71 per barrel. U.S. crude managed above the 10-and-15 day moving averages on a continuation chart.
Crude bulls tried to push prices higher, but high stocks of the fuel tapered gains. The closer the market pushes to the 2013 U.S. crude oil high of $98 per barrel, the more resistance it faces, McGillian added.
The International Energy Agency expects weaker demand growth for oil in 2013, along with higher supply.
Commercial domestic stockpiles of crude hit 395.5 million barrels in the week to May 3, according to the data from the U.S. Energy Information Administration, the highest level since the agency began keeping records in 1982.
Crude oil stockpiles have since eased, but remain high. Stockpiles likely fell for a second consecutive week on higher refinery activity and lower imports, a preliminary Reuters poll of seven analysts showed on Monday.
FED, MIDDLE EAST UNCERTAINTY
Markets are largely waiting on what the U.S. Federal Reserve will do with its monetary policy.
The Fed is currently buying $85 billion in Treasuries and mortgage-backed securities each month to keep down borrowing costs. This policy could end by autumn if the labor market continues to recover, Chicago Fed President Charles Evans said on Monday.
The Fed ending its bond buying programs would support a stronger dollar, analysts said, meaning weaker oil prices.
Oil markets also found some support from tension in the Middle East, which raised worries about the security of supply from the biggest producing region.
Syrian activists said about 30 Lebanese Hezbollah fighters and 20 Syrian soldiers and militiamen loyal to President Bashar al-Assad have been killed this year. This reflects the extent to which Syria is becoming a proxy conflict between Shi'ite Iran and Gulf Arab states such as Saudi Arabia and Qatar, which back Assad's mostly Sunni enemies. (Additional reporting by Christopher Johnson in London and Robert Gibbons in New York.; Editing by Alison Birrane and David Gregorio)