Oil prices rose Tuesday, bolstered by dollar weakness as a political tussle on raising the US debt ceiling persisted, though investors shrugged off fears that a US default would undermine the appetite for riskier assets.
US crude oil was 49 cents higher at $99.69 (Dh365.86) a barrel by 1036 GMT after earlier touching a high of $99.78. Brent crude was up 36 cents at $118.28 a barrel, retreating from the day's high of $118.60.
The index of the dollar against a basket of currencies was down 0.58 per cent. The dollar also hit another all-time low against the Swiss franc, though it recovered slightly in European morning trade.
A weaker dollar boosts oil, priced in the US currency, as it makes it more attractive to holders of other currencies.
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President Barack Obama urged Republican and Democratic leaders to reach a fair compromise on raising the US debt ceiling to avoid default, warning that failure to act could cost jobs and do serious damage to the world's biggest economy.
"There is a political circus, and everyone is saying it could be a disaster if the ceiling is not raised, but the market is not pricing in any catastrophic potential," said Olivier Jakob, analyst at Petromatrix in Zug, Switzerland.
If the debt ceiling is not raised, the US would not be able to pay bills that include monthly Social Security checks, which may lead to a drop in energy consumption.
Still, analysts expect the United States to reach an agreement soon and prices to recover, driven by expectations of steady demand amid reduced global output.
Weighing on assets perceived as sensitive to decreasing risk appetite and keeping oil gains in check, Italy's debt auction results showed rising yields, signalling mounting pressure on the country's finances.
Jakob at Petromatrix pointed to thin volumes and entrenched ranges, with Brent crude hemmed in between its 100-day moving average of $116.50 and the psychological level of $120 and US crude seeing resistance at the $100 per barrel level. Oil and other assets such as base metals and equities that tend to reflect the demand outlook were robust in the face of grim economic data.