Oil Above $102 As US Dollar Weakens

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.