By Santosh Menon
US crude drops 20 cents to $90.79 a barrel, off highs of $91.94 hit earlier in session.
Oil eased to under $91 on Tuesday on profit-taking after an early rally, with hopes of a fresh US rate cut and forecasts of a draw in US distillate stocks provided support for oil prices.
US crude dropped 20 cents to $90.79 a barrel by 1550 GMT, off highs of $91.94 hit earlier in the session.
London Brent crude was five cents down at $91.33 a barrel, off highs of $92.19 but still maintaining its recently-acquired premium to US crude.
"The market is just running into a little profit-taking. The dollar is stronger after the durable goods number," said Tom Bentz, an analyst at BNP Paribas.
The US dollar edged up against the euro and the yen after a report showed unexpectedly high December orders for US durable goods.
Countering that, however, was news of a drop in US consumer confidence in January, with shoppers turning more negative on current business conditions and their assessment of the job market.
Oil, which has been traded lock-in-step with global stock markets lately, was also weighed down by the failure of the US market to build on early gains and the earlier rise in Europe.
European shares rose to the day's highs on expectations the US Federal Reserve would announce yet another aggressive cut in interest rates this week to ward off a recession.
A total of 18 out of 20 primary dealers polled by newswire Reuters forecast the Fed to cut benchmark rates, with 14 expecting a 50 basis points reduction. The Fed cut rates by 75 basis points in an emergency move last week.
Worries that an economic recession in the US could hit oil demand growth have helped pull back crude from record peaks above $100 in early January.
Hopes for a fresh rate cut were bolstered on Monday by data showing weaker-than-expected sales of new homes in the US, stoking fresh fears of a recession.
"I hope they get it [half a percentage point] or more carnage will ensue," said Robert Laughlin of MF Global.
Recent weeks have seen speculators, blamed by some for being behind the oil rally of the past few months, cut their bets on rising oil prices. Data on Friday showed NYMEX crude oil speculators cut their net long positions in the week to January 22 to their lowest since mid-December.
Oil has also found support from expectations Opec will maintain output levels when it meets on Friday in Vienna, despite consumer nations' calls for more oil to bring down prices.
Iran Oil Minister Gholamhossein Nozari was quoted in an Iranian newspaper as saying that "there was no need to supply more oil as the market was supplied sufficiently and its conditions were stable".
Nigeria's oil minister on Monday said prices were not being influenced by supply and demand, echoing recent comments from other Opec ministers, but added that he was concerned about the effect of high prices on demand.
A Reuters poll of analysts, ahead of weekly US government inventory data, forecast crude stocks to rise by 2.1 million barrels and a two million-barrel build in gasoline stockpiles but distillate stocks are expected to fall by 1.9 million barrels. (Reuters)For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.