Oil rose above $72 a barrel on Tuesday due to a weaker U.S. dollar and robust buying interest as investors looked for bargains following last week's price slide to near two-month lows.
The U.S. dollar fell from a recent 8-1/2 month high against the euro, on market speculation that a bailout would soon be organized for struggling Greece.
Oil tends to rise when the dollar falls as it makes it cheaper for non-dollar buyers. Weakness in the dollar also encourages investors to move into more tangible investments such as commodities.
U.S. crude prices for March delivery rose 33 cents to $72.22 a barrel by 1044 GMT (5:44 a.m. EST). At the end of last week, prices briefly dipped below $70 a barrel to the lowest level since mid-December.
ICE Brent crude rose 43 cents to $70.54, after hitting an earlier high of $71.04 a barrel.
After a very sharp sell off at the end of last week, it's making a tentative recovery. The dollar is helping and it's cold in the United States, said oil trader Christopher Bellew at Bache Financial. He added that signs the volume of oil stored at sea was falling lent additional support.
The amount of crude oil held at sea fell by around 15 million barrels to 25.65 million at the end of January versus December, according to shipbroker SSY.
Oil prices have fallen by around 10 percent so far this year, dragged down by lackluster demand in the world's largest oil consumer the United States and concerns about Asian demand if China further tightens its monetary policy.
But oil analysts say that prices may stabilize near current levels as both the 200-day moving average on U.S. crude and the $70 a barrel psychological level provide a support cushion.
WTI is in front of the key support of the 200-day moving average but for that support to hold it will require greater stability in financial markets, said Petromatrix analyst Olivier Jakob.
Investors are awaiting the outcome of a special economic summit of European Union leaders in Brussels on February 11, as the bloc grapples with a debt crisis in Greece and budget concerns in other states.
Traders look to equity markets for signs of a broader economic recovery which could revive flagging oil demand in developed countries. European equities edged higher in early trade on Tuesday.
The market will later look to the release of the weekly U.S. oil inventory data from the American Petroleum Institute due at 2130 GMT for clues about the pace of fuel demand recovery.
U.S. crude oil inventories rose last week by 1.2 million barrels and distillates fell 1.7 million barrels, a preliminary Reuters poll of nine analysts showed on Monday.
Snowy conditions in the key U.S. northeast coast are expected to boost demand for heating oil by 11.5 percent above normal this week, the National Weather Service said on Monday.
Geopolitical tensions over Iran's nuclear programme could also underpin oil prices. The Islamic Republic, which denies its programme has military aims, began work on Tuesday to make higher-grade nuclear fuel, a senior official said.
(Additional reporting by Jennifer Tan in Singapore; editing by Sue Thomas)