Brent crude oil steadied under $112 per barrel on Tuesday on optimism that the euro zone economy may finally be stabilising and that U.S. consumers are beginning to spend again after several years of belt tightening.
Brent futures are near the top of an $8 range seen over the last three months with investors encouraged by world economic trends, despite some negative data suggesting downward risks for global oil demand and prices.
The German economy contracted by a larger-than-expected 0.5 percent in the final quarter of 2012, data showed on Tuesday, but most economists expect it to recover in the months ahead, supporting the euro zone.
U.S. retail sales rose more than expected in December as Americans shrugged off the threat of higher taxes and bought a range of goods, suggesting momentum in consumer spending as the year ended, data showed on Tuesday.
Brent futures for February were down 20 cents at $111.68 per barrel by 1355 GMT. The contract, which expires on Wednesday, settled $1.24 higher in the previous session.
U.S. oil was down 45 cents to $93.69.
"Optimism among investors is at a record high and the general market sentiment is positive so there is no reason for them to withdraw," said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.
"There is no real risk of a sharp sell-off at this point."
But worries abound.
Federal Reserve Chairman Ben Bernanke urged U.S. lawmakers on Monday to lift the country's borrowing limit to avoid a potentially disastrous debt default, warning that the economy was still at risk from political gridlock over the deficit.
The United States bumped into its borrowing limit on Dec. 31, and is now employing special measures to enable the government to meet its financial obligations.
U.S. lawmakers now need to thrash out a deal over the country's debt and settle the budget to avoid drastic automatic spending cuts that have been postponed until March 1.
Prices came under some pressure from expectations of a rise in U.S. oil inventories on higher imports. A Reuters poll of analysts forecast crude stocks would show a rise of 2 million barrels for the week ended Jan. 11. Gasoline stockpiles were expected to have risen 3.1 million barrels.
The American Petroleum Institute (API) was due to release its report at 2130 GMT. EIA will issue its data on Wednesday at 1530 GMT.
Worries about supply disruption from the Middle East have been giving oil prices a floor.
A senior U.N. nuclear watchdog official said on Tuesday he was aiming for an agreement with Iran this week on a framework deal enabling his inspectors to investigate suspected nuclear bomb research.
The West has applied the toughest sanctions ever in an attempt to force Tehran to end its nuclear programme. Iran, which says it needs the technology to generate electricity, has threatened to block the Strait of Hormuz if it is attacked.
"The IAEA is going tomorrow to Iran for talks. That is going to be very important for oil prices for the next six months," said Olivier Jakob, analyst at consultancy Petromatrix in Zug, Switzerland. (Additional reporting by Manash Goswami in Singapore; writing by Christopher Johnson; editing by Keiron Henderson)