Wall Street equities and the dollar received lift from news that US retail sales increased 0.8 percent in November, advancing for a fifth straight month, and that core producer prices also rose 0.3 percent, suggesting an acceleration in economic growth.
But the bounce by the dollar index, which weighed on oil prices, was not sustained as currency markets also eyed the Federal Reserve meeting.
Fed officials met to assess their bond-buying plan against the backdrop of the tentative agreement to extend Bush-era tax cuts, which could help their push to lift US economic growth.
US crude for January delivery rose 9 cents to $88.70 a barrel at 12:43 a.m. EST (1743 GMT), having seesawed between $87.74 and $88.95.
Prices reached a 26-month high of $90.76 on Dec. 7.
"People are looking at the Fed meeting for clues if there will be further help to boost the economy and awaiting inventory data. As the front-month crude nears expiration, you will see a sell-off," Mark Waggoner, president at Excel Futures in Bend, Oregon.
January crude futures options on the New York Mercantile Exchange expire on Wednesday, ahead of the January contract's expiration on Dec. 20.
Total US crude trading volume was above 400,000 lots during the noon hour in New York on Tuesday, putting it easy reach of the previous session's 589,228 lots traded and the 30-day average of 667,478 lots.
ICE Brent crude for January rose 34 cents to $91.53 a barrel, trading between $90.68 and $91.71. The January Brent contract expires on Thursday.
Brent prices were supported by news that daily crude oil output from nine of the main North Sea streams will fall by more than 5 percent in January, according to data compiled on Tuesday from trading sources.
Strong Chinese implied oil demand for November has bolstered demand expectations even as investors remain cautious after China did not raise interest rates despite data at the weekend pegging November inflation at a 28-month high.
The positive sentiment in financial markets will not, however, be enough to sustain an oil price above $90 unless supported by strong fundamentals while downside financial risk from the European debt crisis remains, analysts warned.
"The support is coming from the financial side. I would not be surprised to see the oil prices stagnating or even falling (in the coming days)," Eugen Weinberg, head of commodity research at Commerzbank in Frankfurt told Reuters, adding that supply and demand did not justify the current price levels.
Credit Suisse on Tuesday became the latest bank to lift its oil price forecast, raising its 2011 forecast for US crude futures to $85 per barrel, an increase of $12.50, citing a recovery in global oil demand.
The price forecast was raised "to reflect a recovery in OECD demand (notably in North America) and continued strength in the non-OECD (notably Asia)," the bank said in a note.
Credit Suisse also increased its 2011 ICE Brent price outlook by $12.7 per barrel to $84.50.
US crude oil futures were expected to have declined 2.2 million barrels in the week to Dec. 10, according to a Reuters preliminary survey of analysts on Monday.
But gasoline stockpiles were expected to be up 1.8 million barrels, while distillate inventories were forecast to be down 500,000 barrels.
US gasoline futures also seesawed on Tuesday, with expectations that rising stockpiles will ease supply tightness in the New York Harbor region, delivery point for the gasoline contract.
Distillate stocks will be eyed to see the impact on stockpiles as cold weather in the US Midwest and Northeast and northern Europe boosted heating fuel demand and US heating oil futures, and with the regions' temperatures still near or below normal.
