Oil edged higher on Tuesday, with investors cautious ahead of expected monetary easing from the U.S. Federal Reserve, capping gains from an apparent upwards shift in price tolerance among OPEC ministers.
U.S. crude for December rose 40 cents to $83.35 a barrel at 0506 GMT, adding to gains of nearly 2% the previous session. ICE Brent nudged 28 cents higher to $84.90.
The market was expected to trade in a tight range until Wednesday's decision by the U.S. Federal Reserve, which analysts widely believe will be to pump more money into the world's biggest economy and which could spur more dollar weakness.
The Fed's pending announcement overshadowed comments from Saudi Arabia's Oil Minister Ali al-Naimi on Monday that consumers would be comfortable with oil prices rising as high as $90 a barrel.
"(Naimi's) comments in a normal market would probably shift things, but in this sort of environment investors are looking at the bigger picture. The market is focused on the U.S. dollar at the moment," said David Taylor, an analyst at CMC Markets in Sydney.
Fellow OPEC member Qatar also said a $70-90 price range would be reasonable, but not anything higher.
ALL EYES ON THE DOLLAR
The dollar extended overnight gains after data on Monday showed surprisingly strong growth in the U.S. manufacturing sector, but the numbers probably came too late to stop the Fed from more monetary easing.
For much of this year, international benchmark U.S. crude had largely stuck to the $70-$80 range but has broken above the top of that bracket in the past month, led higher by the weak dollar, which makes dollar-denominated commodities cheaper.
Comments by the two OPEC ministers were interpreted by brokers and analysts as signalling the world's top oil exporter could allow prices to climb to $90, above the $70-$80 range the Kingdom had previously considered satisfactory.
"I think they are reacting to the market. They are raising the range to accommodate the reality so they have cover for not taking action," said Tony Nunan, a risk manager with Tokyo-based Mitsubishi Corp. OPEC next meets in Quito in December.
Industry group the American Petroleum Institute will issue its latest U.S. crude oil inventory data later on Tuesday.
Analysts expect stockpiles in the world's largest energy consumer to have risen for the fourth time in five weeks last week as imports increased.
