Oil recovers

Oil recovered from an early slide on Tuesday in choppy trading as fears of an escalating eurozone crisis and a North Korean attack on a South Korean island triggered a rally in the dollar, but oil bounced when a drop to a session low near $80 attracted buying interest.
The dollar index posted its strongest rise in over a month as questions over Ireland's willingness to adopt an austerity budget threatened to deepen the political crisis and after North Korea fired artillery shells at a South Korean island in one of the heaviest attacks since the 1953 cease fire.
"Markets are under pressure on North and South Korea fighting, as there seems to be a flight to dollars. Concerns about Ireland debt didn't go away. So far crude has held the $80 area," said Tom Bentz, broker at BNP Paribas Commodity Futures Inc. But oil later recouped most of its losses as many traders held off going short ahead of the US Thanksgiving holiday on Thursday and amid expectations weekly oil inventory reports will show stockpiles fell last week.
US crude oil for January delivery fell 2 cents to $81.72 a barrel at 1:34 pm EST (1834 GMT). Oil bounced after earlier sliding to an intraday low of $80.28, with total crude oil volume picking up a bit from Monday's tepid showing. In London, ICE January Brent crude fell 20 cents to $83.76 a barrel.
After weeks of whipsaw trade fuelled by expectations over the Federal Reserve's quantitative easing policy followed by fears of Chinese monetary tightening and European stability, oil prices have traded in a narrow band the past five days, with volumes slumping as the year-end looms.
The European Union urged Ireland on Tuesday to adopt an austerity budget on time in order to receive an EU/IMF bailout despite calls for an immediate general election that could disrupt the rescue. The EU affairs and the Korean incident overshadowed reports showing the US economy grew faster than previously estimated, though existing home sales fell more than expected in October.
Investors also anticipated the release of minutes from the Federal Reserve's November meeting around 2:00 pm EST (1900 GMT) followed by weekly oil inventory data from the American Petroleum Institute at 4:30 pm EST (2130 GMT). "We keep holding above $80 and expectations inventories fell and some short covering ahead of the holiday are supportive," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
US crude stockpiles were expected to have fallen a third straight week following a surprisingly heavy decline a week ago, according to a Reuters analyst survey on Monday. World equities also fell while 10-year Treasury futures rose as the tensions between the two Koreas added to global economic worry.
The euro plunged to a seven-week low against the dollar and fell 2 percent versus the yen on growing worries the eurozone's debt crisis could spread beyond Ireland. The gasoline crack spread also narrowed for a second day, falling to $5.96 intraday and US gasoline futures also remained under pressure. "All the refinery restarts in New York Harbor area still putting pressure on products, mostly RBOB (gasoline)," said Bentz.