The U.S. dollar rose after Australia's central bank surprised markets by leaving its interest rates unchanged, sending the Australian dollar down.
March U.S. crude was up 32 cents at $74.75 at 0540 GMT (12:40 a.m. EST), after touching $75.44 earlier, a rebound of over $3 from last week's 2010 lows. London ICE Brent rose 22 cents to $73.33.
The big gains were linked to expectations of recovery, but people are reassessing oil market fundamentals, looking to the next inventory report to derive some guidance, said David Moore, a commodity strategist with the Commonwealth Bank of Australia.
We have a situation where demand in the U.S. still seems quite subdued. We have seen a fairly marginal movement in the dollar, that might be having a negative impact on the oil price, More said.
U.S. crude stockpiles probably slipped by 200,000 barrels in the week ended January 29 following disruptions at a Texas port, while inventories of distillates, including heating oil and diesel, may have declined by 900,000 barrels, a Reuters preliminary survey showed.
But gasoline stocks likely posted a larger gain of 1.3 million barrels, the poll showed.
Industry group American Petroleum Institute's inventory report will be released at 2130 GMT (4:30 p.m. EST) on Tuesday, followed by government statistics from the U.S. Energy Information Administration on Wednesday at 1530 GMT (10:30 a.m. EST).
Demand for oil isn't really improving, said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd. We don't see any sign of real recovery. There is a huge amount of inventories in the physical markets.
U.S. crude for March delivery reached its highest intraday price since January 22 earlier after prices touched $75, triggering automatic buy orders.
People are quite nervous around $75, Emori said. There was short-covering after prices broke above that level. In the very short term, the market has been oversold, so some people see it as a good time to buy on dips below the $75-$80 range.
An industry report showed on Monday that the U.S. manufacturing sector grew in January at a faster rate than expected, in a sixth straight month of expansion.
The Institute for Supply Management (ISM) index rose to its highest since August 2004, a sign the world's top economy is recovering from the deepest recession in decades, which could boost oil demand.
Ship traffic was back to normal operations along the Sabine-Neches Waterway on Sunday after a tanker collision and oil spill on January 23 shut the channel that supplies crude oil to four U.S. refineries.
(Editing by Michael Urquhart)