Crude prices jumped out of the starting gate on Thursday but then stumbled in late trade, in spite of striding to seven-week highs on forecasts of colder weather in the US north-east.
Nymex WTI for March delivery rose by as much as $49.50 a barrel, its highest since November 30, before easing to a flat $48.38 in New York trade as the US market played catch-up follo wing Monday's public holiday.
On London's International Petroleum Exchange, March Brent futures extended Monday's modest gains, surging to $46.35 before falling back to $45.39, up 36 cents.
Brent prices are up almost $6 a barrel so far this month.
Colder weather predictions were largely felt on heating oil futures with the February Nymex contract up 2.26 cents to $1.3735 a gallon, providing refiners with a near $10-a-barrel mar gin above the crude price.
The IPE gasoil contract was up $6 to $404.50 a tonne in late London trade.
The International Energy Agency, the west's energy watchdog, released its January market report on Tuesday.
The agency revised upwards the estimated demand on the Organisation of the Petroleum Exporting Countries oil by 300,000 barrels per day, as non-Opec supplies are affected by disruptions and accelerating decline rates in mature areas of North America and the North Sea.
The IEA said demand from China, the world's second-largest oil market, hit record levels in November.
Speculators have placed bets on crude oil prices rising further, with data from the US Commodity Futures Trading Commission showing a net 8,614 long contracts in the week ended January 11.
While a bullish indicator, this level is still far below the peak reached in March last year.
However, not everyone is convinced that current prices are fully supported by market fundamentals. Julian Keits at Fimat said that from a "back-to-basics" standpoint comparing histori c US inventory levels with prices, current price levels "look frightening".
Opec's decision on quotas at the end of the month is a critical factor.
"If there is a significant cut, then prices are justified at this level," Mr Keits said.
Gold prices in Europe held up under pressure yesterday, as better-than-expected data on investment flows to US Treasuries in November underpinned a rally in the dollar.
Increased purchases of US securities reduce the appeal of gold as an alternative investment.
Sweden's Riksbank, meanwhile, announced it had sold 15 tonnes of the metal since September.
Under the Central Bank Gold Agreement, the Swedish institution can sell 60 tonnes over five years.
The gold fix price in London closed down 50 cents to $421.75 per troy ounce.
Get alerts on Front page when a new story is published