Oil rose above $67 a barrel on Tuesday, with support coming from the dollar's fall in response to U.S. data showing weak consumer confidence.
U.S. crude futures rose 38 cents to $67.22 a barrel by 1440 GMT, reversing an earlier fall by about $1. North Sea Brent crude futures were up by 24 cents to $66.78.
Obviously, people are looking at what is happening to the dollar now, said Rob Montefusco, oil trader with Sucden Financial.
U.S. consumer confidence fell unexpectedly in September as the worst job prospects in 26 years fueled worries over personal finances, according a report from industry group Conference Board sid on Tuesday.
U.S. stocks rose modestly, having turned negative after the data.
BNP Pariba's senior oil analyst Harry Tchilinguirian said the weak consumer confidence should be bearish for oil demand.
The conference board number does not bode well for a recovery in U.S. oil demand, notably gasoline, but also indirectly for diesel, he said.
Consumers will continue to limit driving but also spending on goods, which in turn will weigh on the demand for freight.
Diesel is used by trucks to carry consumer goods.
After last week's drop of about $8 on concerns over high oil inventories and weak demand, prices have remained at the bottom end of a $65-$75 trading range in place since around July.
The oil market will focus next on two sets of weekly U.S. oil data due out later on Tuesday and Wednesday.
Many analysts expect increases in crude and fuel inventories in the United States, the world's top energy consumer, extending large builds a week before due to weak demand.
A Reuters poll showed that U.S. crude inventories rose 500,000 barrels in the week to September 25.
Inventories of middle distillate, such as heating oil and diesel, and gasoline were forecast to have risen 1.1 million barrels each.
Ahead of the weekly data, U.S. government said the country's oil demand fell 4 percent.
Although oil prices have not responded significantly to heightened tension surrounding Iran, the market has been watching the moves of OPEC's number two producer in recent weeks.
Iran test-fired a type of missile which a commander said could reach any regional target. That followed news of a nuclear fuel facility in south of Tehran, while major powers remain worried about the country's nuclear ambitions.
(Additional reporting by Ramthan Hussain in Singapore; Editing by William Hardy)