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Oil strikes multi-month peaks on eve of Fed

Global oil prices hit multi-month highs on Tuesday on the back of the weaker dollar and on the eve of a key monetary policy announcement in top crude consumer the United States, dealers said.

Brent North Sea crude for delivery in March rallied as high as $114.49, hitting the highest level since mid-October 2012. It later stood at $114.22 per barrel, up 74 cents from Monday's closing level.

New York's main contract, light sweet crude for March or West Texas Intermediate (WTI), struck $97.82, reaching a peak last seen on September 17. The contract later pulled back to $97.58, up $1.14 from Monday.

The US Federal Reserve starts its regular monetary policy meeting on Tuesday and concludes on Wednesday.

The Conference Board meanwhile reported that US consumer confidence sank sharply in January, to 58.6. That was well below expectations.

"Despite the softer confidence data for the US ... the macroeconomic backdrop remains favourable with equities near multi-year highs and the euro at $1.35 as we head to the first day of the Fed meeting," said Sucden analyst Jack Pollard.

The European single currency spiked as high as $1.3496 -- which was last witnessed on December 2, 2011 -- following the weak US consumer confidence data.

The struggling greenback makes dollar-priced crude cheaper for buyers using stronger currencies, and this tends to stimulate oil demand and prices.

"The key driver (for euro/dollar) seems to be the weaker consumer confidence data out of the US, which weighed on the dollar," noted research director Kathleen Brooks at trading site

"The failure at $1.35 is not surprising, as investors are waiting for the Fed and may prefer not to take big positions or push markets above key levels until we hear from (Fed chief Ben) Bernanke and co."

In earlier Asian deals, the oil market had risen after recent upbeat US data and amid fresh concerns over unrest in Egypt and Algeria, dealers said.

"Some positive data out of the US and geopolitical turmoil in Egypt and Algeria are providing support to oil," added Victor Shum, managing director of IHS Purvin and Gertz in Singapore.

US orders for durable long-lasting goods such as vehicles, computers and machinery surged 4.6 percent in December from the previous month, led by a jump in commercial aircraft orders, data showed Monday.

It was the seventh increase in the past eight months and well above the 1.6 percent rise expected by analysts.

Meanwhile, deadly street clashes in Egypt have seen President Mohamed Morsi declare a month-long state of emergency and impose night-time curfews.

The unrest in Egypt, which controls the vital Suez Canal shipping route, has sparked fears of a disruption in supply.

In Algeria, two security guards protecting a gas pipeline were killed and seven others wounded Monday in a fresh attack by Islamists southeast of the capital Algiers.

The attack came nearly a fortnight after an attack on a gas plant in the southern Sahara desert ended with the deaths of almost 40 captives, mostly foreigners.

Price gains were meanwhile tempered this week after the head of the OPEC cartel Secretary General Abdullah al-Badri indicated on Monday that crude supplies were plentiful enough to meet demand in 2013.