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 News that consumer confidence and home prices in the United States were slumping prompted the greenback's decline against major currencies Tuesday, in turn fueling oil prices.
"U.S. economic woes give mixed signals for oil ... all these poor economic data should affect demand in the U.S. negatively and the weaker supply demand fundamentals should pull down prices," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
But "the weak U.S. dollar continues to prop up oil prices due to financial investors engaging in this inflation play," Shum said.
Many investors regard oil and other commodities as inflation hedges, and turn to such hard assets when the dollar is falling. The U.S. currency's protracted slide was a big contributor to oil's march to nearly $112 in recent weeks.
Light, sweet crude for May delivery added $1.20 by noon in Europe to fetch $102.42 a barrel in electronic trading on the New York Mercantile Exchange.
The contract on Tuesday rose 36 cents to settle at $101.22 a barrel.
Analysts and investors appear split on crude's future direction. Many analysts believe oil prices rose much higher in recent weeks than could be justified by supply and demand factors. Prices topped out at a trading record of $111.80 early last week, but have fallen about 10 percent since then.
Other analysts believe the falling dollar will continue to lure investors to the market, particularly given expectations that the Federal Reserve will cut interest rates several more times this year. Falling interest rates tend to weaken the dollar.
Shum said he did not see much technical support for oil to rise back to record levels around $110 a barrel in the near term.
"Even though crude is gaining strength right now, the technical trend is still weak," he said. "In the near term, pricing is likely to trade around the $100 level. The last few days have showed there's strong support around this level."
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 Investors were also eyeing the release of a weekly report on U.S. fuel inventories later Wednesday. The report by the U.S. Energy Department's Energy Information Administration was expected to show crude stockpiles rose for the third straight week.
Crude oil inventories were predicted to rise 1.7 million barrels, according to a Dow Jones Newswires survey of analysts' forecasts.
Gasoline stockpiles were expected to fall 800,000 barrels, and stocks of distillates, which include heating oil and diesel fuel, were seen falling 1.6 million barrels. Refinery use was expected to grow by 0.5 percentage point to 84.3 percent of capacity.
Ahead of the report, The Schork Report, edited by Stephen Schork, noted increased U.S. appetite for gasoline, even though the start of the high-demand summer driving season is months away.
"Per MasterCard's Gasoline Report, U.S. demand rose for the first time in nine weeks compared with year earlier figures," it said, adding purchases at the pump were up 1.2 percent last week compared to the previous week and up 5.3 percent from a year ago.
In other Nymex trading, heating oil and gasoline futures added nearly 2 cents to sell for $2.9435 and $2.6993 a gallon (3.8 liters.) Natural gas futures gained 7.7 cents to $9.496 per 1,000 cubic feet.
Brent crude futures rose 92 cents to $101.52 a barrel on the ICE Futures Exchange in London.
[Associated Press; By GEORGE JAHN]
Associated Press writer Gillian Wong contributed to this report from Singapore.
Copyright 2008 The Associated Press. All rights reserved. This
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