Oil prices edged up in choppy trading on Tuesday, lifted by a weak dollar while markets were buffeted by the continued stalemate over the U.S. debt ceiling that hemmed in Wall Street.

U.S. crude prices briefly jumped back above $100 a barrel to a six-week high after seesawing with Brent, testing technical resistance and support. Before rallying near midday, oil gave up gains near the start of open-outcry trading in New York as U.S. stock futures turned lower ahead of a weak open.

"U.S. crude found support among technical traders, with support coming in at $98. Small buyers are going in, but the big ones are still biding their time," said Richard Ilczyszyn, senior market strategist at Lind-Waldock in Chicago.

Brent September crude rose 34 cents to settle at $118.28 a barrel, trading from $116.53 to $119.05.

U.S. September crude rose 39 cents to settle at $99.59 a barrel, trading from $97.76 to $100.62 which marked the highest since June 10. Prices for two-weeks have been lodged between the $93.55 low on July 12 and Tuesday's intraday peak.

Both U.S. and Brent total crude futures trading volumes surpassed Monday's levels, but stayed below their 30 day averages as they have for more than a week.

U.S. OIL INVENTORIES

Brent crude pared losses and U.S. prices turned lower in post-settlement trading after industry group American Petroleum Institute's weekly report showed U.S. crude stocks jumped 4.0 million barrels last week, against expectations for a drop.

Gasoline stocks fell 639,00 barrels and distillate stockpiles rose 2.9 million barrels, the API said.

Ahead of the API report, U.S. crude stocks were forecast to have fallen 1.7 million barrels, according to a Reuters survey of analysts.

Gasoline stocks were expected to be up 400,000 barrels, with distillates estimated to be up 1.9 million barrels.

The government's inventory report from the U.S. Energy Information Administration follows on Wednesday at 10:30 a.m. EDT.

The API report's surprise crude stocks build came after a Valero Energy Corp (VLO.N) executive told a conference call earlier that maintenance on the Mars oil platform has cut medium sour crude output in the Gulf of Mexico.

Mars platform operator Royal Dutch Shell (RDSa.L) did not immediately respond to a request to confirm the Valero information.

DOLLAR SLUMPS

The dollar hit a record low against the Swiss franc, a traditional safe haven, and it also dropped to a four-month trough versus the yen and a three-week low versus the euro.

A weak dollar can support dollar-denominated oil by making it less expensive for consumers using other currencies and by luring yield-hungry investors to commodities markets.

As the August 2 deadline to raise the debt ceiling approached, the United States is expected to lose its top-notch AAA credit rating from at least one major rating agency, according to a Reuters poll that also found wrangling over the issue has already damaged the economy.

"A breakdown and possible default scenario would possess the bearish aspect of a further slide in the stock market and implications for another recession," Jim Ritterbusch, president at Ritterbusch & Associates said in a note.

"But, on the other hand, a bullish case could be presented in which a weakening dollar could prove supportive to energy should a default scenario unfold," he added.

The stalemate in Washington over the debt ceiling dragged down U.S. equity markets for a second day, with light volume indicating gridlock has made investors reluctant to make bets despite another round of healthy earnings. .N

Markets shrugged of government data showing the median sales price for U.S. single family homes increased in June from the previous month and was up from the year-ago period. More supportive for oil was the Conference Board's index of consumer attitudes rising to 59.5 from 57.6 in June, beating economists' expectations for a reading of 56.0.